audit procedure to verify outstanding premium and agent’s balance. unable to learn. may be due to lack of clarity somewhere in context.
There can be receivable debit balances in case of outstanding premiums, because of unpaid premiums and also in agents account because of advance paid or collection not yet deposited to company bank account.
Debit balances are always a big problem in any company, as non recovery leads to losses and depletion of profits.
Following is the procedure.
The following are the audit procedures to be followed for verification of outstanding premium and agents’ balances:
1. As you go you will find general ledger in which you will find controls accounts representing other ledgers like “Debtor Ledger Adjustment” , we will have similar for premiums and agent balances
Scrutinise and review control account debit balances and their nature should be enquired into.
2. Ask for inoperative accounts & old outstanding balances
Examine inoperative balances and treatment given for old balances with reference to company rules.
Enquire into the reasons for retaining the old balances
3. Ask for ageing
Check age-wise, sector-wise analysis of outstanding premium.
4. After identification of problematic accounts ask for subsequent collection
Verify whether outstanding premiums have since been collected.
5.Are balances covered
Check the availability of adequate bank guarantee or premium deposit for outstanding premium.
6. Ask for write off or provision
Verify old debit balances which may require provision or adjustment. Notes of explanation may be obtained from the management in this regard.