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Question 2 : You are an auditor on the Eagle Limited engagement for the financial year ending 3 0 June 2 0 2 4 .

Question
2
:
You are an auditor on the Eagle Limited engagement for the financial year ending
3
0
June
2
0
2
4
.
Eagle is a large Australian private health insurer that also provides a range of
complementary health management services and life, travel and pet insurance products. During
the year, Eagle transitioned from a government business enterprise to a listed company by way
of an initial public offering and listed on the ASX in November
2
0
2
3
.
You are currently
planning the Eagle audit and have noted the following information:
Eagle maintains an investment portfolio
(
consisting of mortgage asset
-
backed
securities
,
hybrid investments and direct property
)
to meet insurance claims. During
the year, it has recorded significant investment income from its portfolio of investment
assets in the face of substantial economic and market volatility
(
interest rates,
exchange rate and equity market volatility
)
.
Eagle has experienced a spike in the number of improper
(
fraudulent or erroneous
)
health benefit claims. Management has launched a payment integrity program during
the year to identify, prevent and recover improper claims.
You have noticed a significant increase in the number of health insurance policies
being taken out around the June
/
July period. Health insurance premium revenue is
recognised in the income statement over the life of the policy, starting from the
commencement date of the current period of insurance cover, in accordance with the
pattern of the incidence of risk expected to match the seasonality of claims over the
term of the insurance cover. Premium revenue relating to future financial periods is
classified as an unearned premium liability.
Eagle maintains a claim liability provision for the estimated cost of claims incurred
but not settled at balance date. This is estimate based on the assumption that past
claims settlements are an appropriate predictor of expected future claims settlement
patterns.
One of the Eagle main subsidiaries, NHA, has engaged in acquiring and retaining
policyholders in the new
-
to
-
industry segments of the market by focusing on
affordability and flexibility of its policies. Due to the nature of the industry and value
of individual policies, NHA, regularly monitors its premiums in arrears and prompt
recovery action is undertaken when accounts in arrears are identified. Where accounts
remain in arrears past a grace period of
7
0
days as specified in the standard contract
extended to customers, NHA
s practice is to terminate these policies. NHA engages
debt collection agencies to obtain settlement of accounts in arrears where all other
efforts prove futile.
Required:
(
a
)
Identify the key accounts and related assertions at risk. Briefly justify your answer
(
b
)
Perform one substantive test of detail for each of the identified assertions at risk. Can you send the answers with the references in chicago format and also free from AI and plagarism? This is Applied Auditing and Risk Assessment Unit Case study and the word limit is
5
0
0
words

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