SOFE AFE Designation AFE Questions & Answers

• Question 41:

  An entity's practices concerning loss settlement, such as a practice of vigorously defending suits or of quickly settling suits, can have a significant effect on an entity's loss experience.

  A. True

  B. False

  Correct Answer: A

• Question 42:

  A basic premise underlying the application of is that it is reasonable to assume that plausible relationships among data exist and continue in the absence of known conditions to the contrary.

  A. Independent estimates

  B. Statistical claims

  C. Analytical procedures

  D. None of the above

  Correct Answer: C

• Question 43:

  The method which assumes that an entity's experience in estimating case-basis reserves will be repeated in the future is called:

  A. Paid loss projection

  B. Reported loss development projection

  C. Incurred loss projection

  D. Internal entity loss projection

  Correct Answer: B

• Question 44:

  What method assumes that an entity's historical experience relating to the timeliness of settlement will be predictive of future results?

  A. Paid loss projection

  B. Unpaid loss projection

  C. Incurred loss projection

  D. Loss ratio projection

  Correct Answer: A

• Question 45:

  In which of the following, Internal entity experience or information from published sources concerning recent trends in socioeconomic factors affecting claim payments:

  A. general inflation rates

  B. judicial decisions assessing liability

  C. judicial decisions regarding noneconomic damages

  D. All of the above

  Correct Answer: D

• Question 46:

  The loss reserve estimate is a significant estimate in the financial statements of an uninsured entity.

  A. True

  B. False

  Correct Answer: B

• Question 47:

  Procedures for ensuring that the data used by the loss reserve specialist is completed and accurate due to:

  A. Controls over the preparation of managerial data

  B. Controls over the preparation of accounting estimates

  C. Controls over the preparation of supporting data

  D. Controls over the preparation of assumed alternatives

  Correct Answer: C

• Question 48:

  Scope of Examination and Report of Independent Certified Public Accountant states that:

  A. the insurer shall also require that the independent certified public accountant subject the data used by the appointed actuary to testing procedure.

  B. the insurer shall also require that the group of certified public accountant subject the data used by the appointed actuary to planning procedure.

  C. the investor shall also require that the independent certified private accountant subject the data used by the appointed actuary to developing procedure.

  D. the investor shall also require that the independent certified public accountant subject the data used by the appointed actuary to maintaining procedure.

  Correct Answer: A

• Question 49:

  With which standard, the auditor's substantive procedures must include reconciling the financial statements to the accounting records and should include examining material adjustments made during the course of preparing the financial statements.

  A. Integrated Audit Financial Statement

  B. Public Company Accounting Oversight Board

  C. Audit of Financial Reporting over Internal Control

  D. National Association of Insurance Commission

  Correct Answer: B

• Question 50:

  The establishment of loss reserves generally requires considerable judgment and knowledge of the entity's business is known as:

  A. integration assessment

  B. procurement assessment

  C. qualitative assessment

  D. quantitative assessment

  Correct Answer: C