CIA.Mat Flashcards
define materiality
an OUO (omission, understatement or overstatement) is material if the actuary expects it to materially affect the user’s decision making or reasonable expectations
what materiality is not
NOT
- a range of reasonable values around actuarial estimate
- inherent uncertainty in an actuarial estimate
identify the main consideration in setting a materiality level
specify:
- use of work, intended users
- there is no obligation to communicate with other than intended audience
identify circumstances where the materiality level should change
- when an external benchmark is approached (e.g. regulatory action level)
- otherwise, it should be consistent over time and between valuations
identify characteristics of an insurance company that may affect materiality
F-STARS
- Financial Strength
- Size of entity
- Type of business
- Access to capital
- Net retention
- Stage of organizational life cycle
identify a metric to test materiality for regulatory or solvency purposes
- statutory surplus
- solvency benchmark ratio
identify a metric to test materiality for appraisals
- net worth
- net income
- EPS (Earnings Per Share)
identify a metric to test materiality for general purpose of financial statements
- statutory surplus
- net income
identify which application has a less rigorous materiality level, DCAT or Valuation
DCAT is less rigorous严格的 -> higher materiality standard
DCAT:
- used for surplus in scenario testing
Valuation:
- this impacts net income, which is more important
- need to detect smaller deviations here
considerations for extend of disclosure of materiality
- sophistication of user
- important of concept to user
- complexity of concept
possible actions of report writer based on materiality
- include? whether item should be considered
- refine? whether item is sufficiently accurate
- disclose? whether item should be reported
