Accredited Financial Examiner (AFE) (AFE) Free Practice Test

Question 1

Which of the following is NOT the step of the transaction cycle?

A. Billing and collecting premiums

B. Home office and branch office recordkeeping

C. Evaluating and accepting expenses

D. Issuing policies

Correct Answer: C

Question 2

What is applied to the sale of all or a block of an entity's insurance in force of another entity?

A. Syndicated insurance

B. Insurance impede

C. Poly-holder insurance

D. Portfolio Reinsurance

Correct Answer: D

Question 3

What features a reserve that accumulates at company declared credited interest rates, which are periodically reset?

A. Credited life insurance

B. Universal life insurance

C. Periodic life insurance

D. Premium life insurance

Correct Answer: B

Question 4

reserves for income tax purposes are referred to as maximum tax actuarial reserves (MTAR) and replace the actuarial liabilities used for accounting purposes in computing taxable income.

A. None of the above

B. Procedure-related

C. Standardized- related act

D. Policy-related

Correct Answer: D

Question 5

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

A. Unpaid loss projection

B. Incurred loss projection

C. Loss ratio projection

D. Paid loss projection

Correct Answer: D

Question 6

GAAP have two important functions. First, they provide a set of standards that endeavor to measure with reasonable accuracy the assets held, liabilities owed, revenue earned, and expenses incurred by the company. For life insurance companies these measurement rules have been prescribed specifically for their specialized products. The second important function of GAAP is:

A. To ensure the comparability of financial data

B. To ensure the comparability of financial data from quarter to quarter within each company and with similar data prepared by other companies

C. To ensure the comparability of financial data from year to year within each company and with similar data prepared by other companies

D. To ensure the comparability of financial data from month to month within each company and with similar data prepared by other companies

Correct Answer: C

Question 7

Most life insurance companies that are taxable in Canada fall into which one of the following classifications:

A. Nonresident life insurance companies operating in Canada through a branch

B. All of the above

C. Multinational life insurance companies resident in Canada

D. Domestic life insurance companies

Correct Answer: B

Question 8

An attitude that includes a questioning mind and a critical assessment of audit evidence is called:

A. None of the above

B. Operational skepticism

C. Professional skepticism

D. Audit skepticism

Correct Answer: C

Question 9

The date on which the contract becomes effective is known as _.

A. record date

B. reinsurance date

C. policy date

D. report date

Correct Answer: C

Question 10

Which of the following may NOT involve a high degree of management judgment and subjectivity and may present risks of material misstatement due to fraud?

A. Reinsurance

B. key estimates

C. Investments

D. Deferred acquisition costs

Correct Answer: B

Question 11

Which of the following is Correct?

A. the financial position of an entity with a 2-to-1 reserve-to-surplus ratio is more affected by variability in its loss reserves than is an entity operating at 4-to-1 ratio.

B. the financial position of an entity with a 4-to-1 reserve-to-surplus ratio is more affected by variability in its loss reserves than is an entity operating at 2-to-1 ratio.

C. the financial position of an entity with a 2-to-1 reserve-to-surplus ratio is less affected by variability in its loss reserves than is an entity operating at 4-to-1 ratio.

D. the financial position of an entity with a 4-to-1 reserve-to-surplus ratio is less affected by variability in its loss reserves than is an entity operating at 2-to-1 ratio.

Correct Answer: C

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IFPUG Accredited Financial Examiner (AFE) (AFE) Free Practice Test