SOFE SOFE Certifications AFE Questions & Answers

• Question 121:

  The maximum error in the population that the auditor is willing to accept is called:

  A. Risk of material misstatement

  B. detection of risk

  C. Both A and B

  D. Neither A nor B

  Correct Answer: C

• Question 122:

  The contracts that are not subject to unilateral changes in its provision and requires the performance of various functions and services for an extended period is called:

  A. Short-duration

  B. Long-duration

  C. Medium-duration

  D. Fixed-duration

  Correct Answer: B

• Question 123:

  SAP stresses measurement of emerging earnings of a business from period to period while GAAP stresses measurement of the ability to pay claims in the future.

  A. True

  B. False

  Correct Answer: B

• Question 124:

  Short-duration contracts provide insurance protection for fixed period and can cancel the contract at the end of any contract period.

  A. True

  B. False

  Correct Answer: A

• Question 125:

  Principal objectives of state statutes are: to investigate and settle some or all of the

  A. restrict investments of insurance entities

  B. prescribe methods of admitted asset recovery

  C. acquisition of risk-based capitals

  D. Both B and C

  Correct Answer: A

• Question 126:

  The reason behind, when an insurance entity may request permission from the domiciliary state regulatory authority to use a specific accounting practice in the preparation of its statutory financial statements, may include:

  A. the entity wishes to depart from Statutory Accounting Practices (SAP)

  B. the prescribes SAP address the accounting for transaction

  C. Both A and B

  D. Neither A nor B

  Correct Answer: A

• Question 127:

  When no tax deductions are allowed if risks are not transferred, whereas premiums paid to insurers are tax deducible, this leads to the formation of:

  A. Portfolio

  B. Claims

  C. Captives

  D. Fronting

  Correct Answer: C

• Question 128:

  Insurance entities establish claims of the member companies.

  A. Company competency

  B. Claim opportunities

  C. Corrective strategies

  D. Adjustment bureaus

  Correct Answer: D

• Question 129:

  Spreading of risks among insurance entities is called:

  A. Reinsurance

  B. Syndication

  C. Consortium act

  D. Risk Diffusion

  Correct Answer: A

• Question 130:

  The entity transferring the risk is called the ceding entity and the entity to which the risk is transferred is called the assuming entity.

  A. True

  B. False

  Correct Answer: A