With an Audit Insurance policy, your business is protected if anything happens to you. This protects against the unexpected and covers damages to finances, property, and personal injury that may occur. In order to get a policy for your business, you’ll need all of this information.
Here are 7 Things to Know About Audit Insurance
Auditing is the practice of examining an entity’s financial statements to ensure that they reflect the organization’s transactions in a valid and reliable manner. Insurance companies provide auditing insurance to protect themselves from claims of wrongdoing that could lead to a loss. To learn more about audit insurance, here are seven things you might want to know:
- You Are the Auditee:
The insurance company should accept the responsibility of acting as an independent third party to examine their accounts so that they are not held responsible for any fraud or errors and have the right to deny coverage, pay higher rates, and refuse renewal. - The Insurance Company Cannot Conflict Personal Relationships:
Collusive relationships with the employer could influence an auditor’s opinion of the company’s reliability if there is potential for a conflict of interest. For example, an insurance agent usually handles property damage claims, and if the agent is in a position to negotiate lower rates for higher volume clients, it might be a balance.
- The Insurance Company Cannot Identify Non-Auditees:
Ask only those questions that relate solely to questions regarding their operations, and you will decrease any chance of them identifying an individual or organization for scrutiny. - Heading the Act:
Speaking about auditing principles such as random sampling may allow internal experts like accountants or statisticians a perfect opportunity to diminish the value of the overall audit. It also sends a message to an audit committee that might not understand sampling concepts or other statistical tools used like confidence limits or means. Before heading into any type of discussion, ask what expense the company has with regard to auditing. - The Auditee is Not Prepared:
In the private sector, auditees have an inherent responsibility to better prepare for audits. There is no validated guidance on how best to prepare for an audit, but good auditing results come from adhering to industry and regulatory standards for performance thereof. - Inappropriate:
Purge or Termination of Assets Existing client has several power supplies in inventory with built-in safety redundancy, integrated temperature monitoring, and voltage compliance. These features are not required by any requirements in design but present an excellent cost-benefit. Clients often pursue a half-step purging strategy on the grounds of perceived regulatory concerns. This strategy contributes to a long time between the audits and incorrect reconciliations. Auditors should question such times as there is no empirical evidence to show it adds delay, cost, or effort to audit quality and completion. - Capital Allocation Distortion:
Auditees like to use capital allocation models, which tend to artificially lower risk (because capital is non-earning) and improve performance (which is earning money). The problem with these models is that they often create unique events which capital allocation is not easily evaluated against. In principle, this problem could be reduced by selling part of the capital below basic earnings or borrowing short-term and putting the proceeds into fixed investments such as equipment. However, this will present additional problems for you as an auditor.
