What Is Prepaid Insurance?

The prepaid insurance premium is only a part of the insurance premium paid when the insurance policy is opened, and the total amount is calculated afterwards. [1] Prepaid insurance premiums are insurance values that are insured by the company to protect the property against accidental losses. In the event of an accident, an equivalent amount of compensation can be used to cover the losses paid. [2]

Prepaid insurance premiums

Right!

The prepaid insurance premium is only a part of the insurance premium paid when the insurance policy is opened, and the total amount is calculated afterwards. [1] Prepaid insurance premiums are insurance values that are insured by the company to protect the property against accidental losses. In the event of an accident, an equivalent amount of compensation can be used to cover the losses paid. [2]

Prepaid insurance premiums are typical accounts in deferred asset projects. Because almost every type of insurance is involved in every business, auditors often cannot avoid checking insurance premiums during audits. In addition, the audit of prepaid insurance premiums is representative in various deferred asset projects. Some issues, such as the review of insurance premiums, are not encountered in the audit of other deferred projects. The prepaid premium audit is closely linked to the premium account. The amount of the premium account is the remaining amount rolled back from the opening balance, the premiums paid during the year, and the year-end balance. In other words, the credited amount of the premium account comes from the lender of the prepaid premium account. However, since the payment of insurance premiums has been tested in the purchase and payment cycle, the focus of this review is prepayment of insurance premiums. ^[1]

Chinese name

Prepaid insurance premiums

Definition

Pay only part of the premium when opening an insurance policy

Gold

Get the same amount of compensation

Classification

financial

Audit steps

The audit steps for prepaid premiums are as follows:

(1) Focus on the effective implementation of certain internal control systems: Check the control of the occurrence and recording of insurance premiums, whether each payment of insurance premiums has been properly authorized, and whether it follows normal payment procedures. Designate a special person to keep the insurance register, and an independent and competent staff member will regularly check the appropriateness of the insurance amount. Check the control of insurance premium reselling.

(2) Request a detailed list of prepaid insurance premiums, or prepare a copy by the auditors themselves. The review of this table does not focus on the balance at the beginning and end of the period, but mainly analyzes the amount of prepaid insurance premiums and whether the insurance expenditures are reasonable. The main work is: Compare the relevant data in the table with the previous year to analyze the rationality of certain changes during the year. Calculate the ratio of prepaid insurance amount and insurance premium and compare it with previous years. Check whether there is any change in the insurance coverage in this period, whether some insurance policies have been cancelled, analyze the reasons, and confirm the appropriateness of the insurance coverage.

(3) It is judged that the insurance business listed in the detailed list of prepaid insurance premiums has actually occurred, and all the insurance business that has occurred has been included in the current account in full, and the integrity and reality check has been completed accordingly. The available methods are: Letter to the insurance company. Check the original documents for any inconsistencies.

(4) Check whether the prepaid insurance premium is owned by the customer, that is, check whether there is another claimant on the insurance policy to discover unrecorded liabilities and mortgage assets.

(5) Check that the calculation of each item is correct and that the value of each item is correct. The total of the detailed account is consistent with the general account.

(6) Check the expenses related to the advance payment of insurance to see if the classification is correct and whether it is consistent with the previous year.

(7) Simply check whether the records of the insurance business have paid attention to the accuracy of the record period. Check whether the various expenses are indeed deferred and whether there are any items that should not be borne by the latter as a later burden. At the same time, check whether the items that should be repaid in the next period have been transferred to deferred items.

(8) Check whether each item listed as deferred assets is actually paid and recorded in the corresponding account, and whether the entry is correct.