Wednesday, July 25, 2007

#20 Practical audit tips- Insurance Coverage

Insurane policies is a way of the company to mitigate/ minimize certain aspect of risks exposed by the company, for instance natural disasters, flood.

Auditors could check the amount insured by the insurance policies bought by the companies against the respective assets. For instance, the companies might have few fire insurance policies amounted to $2 million for its buildings.

Auditors could ensure that the fixed assets are while covered by examing the Net Book Value of the buildings. Assuming the NBV of the buildings are $3.5 million, and this signaled that additional insurance should be entered to ensure that the risk is monitored cautiously.

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