Auditing group accounts in examining life insurance company financial statements;

              Auditing Group Accounts in Examining life Insurance Company Financial Statements
by VICTOR F. MAINENTE Principal, New York Office
Presented before the Northeast Chapter of the Insurance Accounting and Statistical Association, Hartford—November 1964
In AUDITING the accounts of life insurance companies the principal objec-tive of the independent certified public accountant is to perform the work necessary for him to express an opinion on the financial statements as a whole. His approach usually is to examine the accounts arising from group operations as they relate to the financial statements rather than the accounts related to group operations as a unit; that is, he tests group premium income as a part of the examination of all types of premium income and tests group claims paid as part of the examination of all types of claims paid.
ESSENTIAL AUDITING PHASES—GENERAL
The essential phases of auditing, in their modern concept, applicable generally to most business organizations are four. Briefly, they are: (1) evaluation of internal control; (2) minimum auditing tests; (3) analytic review; and (4) additional auditing tests.
Evaluation of Internal Control
Internal control has been defined by the Committee on Auditing Proce­dure
of the American Institute of Certified Public Accountants as:
. . . the plan of organization and all of the coordinate methods and measures adopted within a business to safeguard its assets, check the accuracy and reliability of its accounting data, promote operational efficiency, and encourage adherence to prescribed managerial policies.
The basic concept of internal control appears to me to be the segrega­tion
of duties and responsibilities so that the activities of one individual or unit serve to check on the activities of another individual or unit. In this way the likelihood of significant errors or irregularities is minimized, and the temptation that may be present if one individual is in complete charge of an entire transaction is removed.
The evaluation of internal control ordinarily comprises (1) the use of charts or the equivalent to show the flow of basic accounting transac­tions;
(2) the physical observation of organizational structure; (3) in­quiry
of employees concerning their duties; (4) the identification of those
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