Template of Auditor’s Report of Life Insurance Company in Bangladesh

Independent Auditor’s Report

To the Shareholders of ABC Life Insurance Company Limited

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of ABC Life Insurance Company Limited (the
Company), which comprise the Statement of Financial Position as at 31 December 20XX, and
the Life Revenue and Profit and Loss and Other Comprehensive Income Account, Statement of
Changes in Equity and Statement of Cash Flows for the year then ended, and notes to the
financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects,
the financial position of the company as at 31 December 20XX, and its financial performance
and its cash flows for the year then ended in accordance with International Financial Reporting
Standards (IFRSs), the Companies Act 1994, the Insurance Act 1938 (as amended in 2010),
the Securities and Exchange Rules 1987 and other applicable laws and regulations.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditors’ Responsibilities for
the Audit of the Financial Statements section of our report. We are independent of the
Company in accordance with the International Ethics Standards Board for Accountants’ Code of
Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that
are relevant to our audit of the financial statements in Bangladesh, and we have fulfilled our
other ethical responsibilities in accordance with the IESBA Code. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Emphasis of Matter (if any)

Examples could be:
- An uncertainty relating to the future outcome of exceptional litigation or
regulatory action.
- Early application (where permitted) of a new accounting standard (for
example, a new International Financial Reporting Standard) that has a
pervasive effect on the financial statements in advance of its effective
date.
- A major catastrophe that has had, or continues to have, a significant
effect on the entity’s financial position

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the consolidated and separate financial statements of the current
period. These matters were addressed in the context of our audit of the financial statements as
a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.

[Description of each key audit matter in accordance with ISA 701.]

Template of Auditor’s Report of Life Insurance Company in Bangladesh

Please refer to Annexure 1 for some examples of Key Audit Matters (KAM) for
illustrative purposes.

*Other Information [or another title if appropriate such as “Information Other than
the Financial Statements and Auditor’s Report Thereon”]

Management is responsible for the other information. The other information comprises all of
the information in the Annual report other than the financial statements and our auditors’
report thereon. The directors are responsible for the other information.

Our opinion on the financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit or otherwise appears to
be materially misstated. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that fact. We have
nothing to report in this regard.

* Where applicable, the auditor shall report in accordance with ISA 720 (Revised).

Responsibilities of Management and Those Charged with Governance for

the Financial Statements and Internal Controls
Management is responsible for the preparation and fair presentation of the financial statements
in accordance with IFRSs, the Companies Act 1994, the Insurance Act 1938 (as amended in
2010), the Securities and Exchange Rules 1987 and other applicable laws and regulations and
for such internal control as management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to
liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial
reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain
professional skepticism throughout the audit. We also:
Template of Auditor’s Report of Life Insurance Company in Bangladesh

 Identify and assess the risks of material misstatement of the financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those
risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for
our opinion. The risk of not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.

 Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances.

 Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by management.

 Conclude on the appropriateness of management’s use of the going concern basis of

accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Company’s
ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor’s report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Company to cease to
continue as a going concern.

 Evaluate the overall presentation, structure and content of the financial statements,
including the disclosures, and whether the financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those
matters that were of most significance in the audit of the financial statements of the current
period and are therefore the key audit matters. We describe these matters in our auditor’s
report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.

Report on other Legal and Regulatory Requirements

In accordance with the Companies Act 1994, the Insurance Act 1938 (as amended in 2010),
the Securities and Exchange Rules 1987 and relevant notifications issues by Bangladesh
Securities and Exchange Commission, we also report that:
Template of Auditor’s Report of Life Insurance Company in Bangladesh

a) We have obtained all the information and explanations which to the best of our
knowledge and belief were necessary for the purpose of our audit and made due
verification thereof;

b) In our opinion, proper books of accounts, records and other statutory books as required
by law have been kept by the Company so far as it appeared from our examinations of
those books and proper returns adequate for the purpose of our audit have been
received from branches not visited by us;

c) As per section 62(2) of the Insurance Act 1938 (amended in 2010), in our opinion to
the best of our knowledge and belief an according to the information and explanation
given to us all expenses of management wherever incurred and whether incurred
directly or indirectly, in respect of insurance business of the company transacted in
Bangladesh during the year under report have been duly debited to the Revenue
Accounts of the Company;

d) The information and explanations required by us have been received and found
satisfactory;

e) As per regulation 11 of part 1 of the third schedule of the Insurance Act 1938 (amended
in 2010), in our opinion to the best of our information and as shown by its books, the
company during the year under report has not paid any persons any commission in any
form outside Bangladesh in respect of any its business re-insured abroad;

f) The Statement of Financial Position, Life Revenue and Profit and Loss and Other
Comprehensive Income Accounts and Statement of Changes in Equity and Statement of
Cash Flows of the Company dealt with by the report are in agreement with the books of
account and returns;

g) The expenditure was incurred for the purpose of the Company’s business; and

h) The company has complied with relevant laws and regulations pertaining to reserves.

Dated, Dhaka ------------------

…. February 20XX Engagement Partner name*
Signature

* ISA 700 (Revised) requires that the name of the engagement partner shall be included in the
auditor’s report on financial statements of listed entities unless, in rare circumstances, such
disclosure is reasonably expected to lead to a significant personal security threat.
Template of Auditor’s Report of Life Insurance Company in Bangladesh

Annexure 1

Key Audit Matters

[Below is a list of key audit matters is for illustrative purposes. This is not an
exhaustive list; each individual matter may not be relevant to every engagement.
The selection of matters as a key audit matter and the responses to such matters
and the risks they pose is a matter of professional judgment by the audit
engagement team]

Key audit matter How our audit addressed the key matter
Contingencies relating to income tax
As disclosed in note … to the financial Our audit procedures included:
statements, the Company has a pending tax
 Understanding the process of
assessments for the assessment year
estimating, recording and reassessing
…..(Income year ….) as there is a dispute
tax provision and contingencies.
with the National Board of Revenue (NBR).
 Involving our tax specialist to assist in
The determination of provisions and
analysing the judgments used to
contingent liabilities arising from the open tax
determine provisions for matters based
assessments make this a particular area of
on their knowledge and experience of
significant judgement.
local regulations and practices.
 Inspecting the correspondence with tax
authorities.
We focused on management’s assessments
 Inspecting reports on open tax
of the likely outcome and qualification of tax
assessments prepared by the company’s
exposure which involves significant
tax advisors and in-house tax manager
judgement.
and where appropriate documentation
considered necessary to understand the
We also consider there to be a risk that the position and conclusions made by the
tax discloser in Notes …. and …. to the company. We also obtained external
financial statements, which are significant to confirmations from legal council on
the Company’s tax position may not be significant tax litigation.
adequate.  We also assessed the adequacy of the
Company’s financial statements
disclosures in respect of the tax
positions and contingent liabilities.
Template of Auditor’s Report of Life Insurance Company in Bangladesh

Key audit matter How our audit addressed the key matter
Valuation of life fund
Valuation of life fund involves complex and The work to address the valuation of life fund
subjective judgments about future events, both included the following procedures:
internal and external to the business, for which
• We understood the governance process in
small changes in assumptions can result in
place to determine the life fund, including
material impacts to the valuation of these
testing the associated financial reporting
liabilities.
control framework.
• We tested the design and operating
effectiveness of controls over the accuracy and
completeness of data used.
• Using our actuarial specialist team members,
we applied our industry knowledge and
experience and we compared the methodology,
models and assumptions used against
recognized actuarial practices.
• We tested the key judgements and controls
over the liability, including the preparation of
the manually calculated components. We
focused on the consistency in treatment and
methodology period-on-period and with
reference to recognised actuarial practice.
• We assessed the disclosures in the financial
statements. As part of our consideration of the
entire set of assumptions, we focused
particularly on the Annuitant Mortality, Credit
Default and Expense assumptions for the life
fund given their significance to the Company’s
result and the level of judgement involved.
These have been considered in greater detail
below.
Based on the work performed and the evidence
obtained, we consider the assumptions used to
be appropriate.
Template of Auditor’s Report of Life Insurance Company in Bangladesh

Key audit matter How our audit addressed the key matter
Annuitant Mortality Assumptions
(Group)
Annuitant mortality assumptions require a In addition to the procedures above, in respect of
high degree of judgement due to the number the annuitant mortality assumptions:
of factors which may influence mortality
• We tested the methodology used by
experience. The differing factors which affect
management to derive the assumptions with
the assumptions are underlying mortality
reference to relevant rules and actuarial guidance
experience (in the portfolio), industry and
and by applying our industry knowledge and
management views on the future rate of
experience. This included evaluating
mortality improvements and external factors
management’s choice of, and fitting to, the CMI
arising from developments in the annuity
base tables and the adoption of the CMI 2016
market.
model and dataset for improvements and the
margin for prudence.
There are two main components to the • We assessed the results of the experience
annuitant mortality assumptions: investigations carried out by Bangladesh Life
management for the annuity business to
determine whether they provided support for the
• Mortality base assumption: this assumptions used by management.
component is typically less subjective as it is
• We compared the mortality assumptions
derived using the external Continuous
selected by Bangladesh Life against those used by
Mortality Investigation (CMI) tables, adjusted
their peers.
for internal experience. However, judgement
is required in choosing the appropriate table
and fitting internal experience to this table.
Based on the work performed and the evidence
• Rate of mortality improvements: this obtained, we consider the assumptions used for
component is more subjective given the lack annuitant mortality to be appropriate.
of data and the uncertainty over how life
expectancy will change in the future.
Management has adopted the most recent
CMI 2017 model and dataset in setting this
assumption with specific adjustments to
reflect the profile of their portfolio and their
views on the rate of mortality improvements.
In addition, a margin for prudence is applied
to the annuitant mortality assumptions.
Template of Auditor’s Report of Life Insurance Company in Bangladesh

Key audit matter How our audit addressed the key matter
Provision for Income Tax
Provision for income tax requires the We reviewed the tax calculation work flows and
consideration of incomes from both ‘actuarial related details. To be specific, our substantive
surplus’ and ‘gross external incomings’ in testing procedures included the following:
accordance with the 4th schedule of the
- We made sure that tax was calculated on the
Income Tax Ordinance (ITO 1984). For this
higher base comparing between the incomes from
purpose after the year-end, the appointed
‘actuarial surplus’ and ‘gross external incomings’.
Actuary of the Company provides a summary
and valuation of the policies as per ‘Form H’ - Actuarial surplus was derived properly taking
as stated in the Insurance Act 1938. into consideration the approved Form H by the
Valuation amount in access of the ‘Life Fund appointed Actuary.
as reported in the Financial Statements’ is - Incomes from ‘gross external incomings’ were
referred to as ‘actuarial surplus’. Also the derived properly.
income from ‘gross external incomings less
management expense’ is derived. As per the - Deductions as allowable by the 4th Schedule of
ITO 1984, tax has to be calculated on the ITO 1984 were applied duly.
higher base comparing between the incomes
from ‘actuarial surplus’ and ‘gross external
incomings’ at the rate applicable considering
the allowable deductions as per the 4th
Schedule of the said Ordinance.

Valuation of investments in subsidiaries and joint venture (Company)

In the Company's statement of financial In respect to the fair value of investments in
position, subsidiaries and joint venture are subsidiaries and joint venture:
reported at fair value estimated using
 We understood and tested the methodology
applicable valuation models underpinned by
in place to determine the fair value of
the company's market capitalisation.
investments in subsidiaries and joint venture.
 We tested adjustments made to the market
The determination of the fair value is a capitalisation and underlying data inputs on a
judgemental area and the investments in sample basis.
subsidiaries and joint venture together  Used our valuation experts, to assess and test
comprise the largest assets in the parent the appropriateness for inclusion of selected
company’s statement of financial position. comparable companies used in the multiples
 based valuation model, on a sample basis.
 We assessed the disclosures in the financial
statements.

Based on the work performed and the evidence

obtained, we consider the assumptions used by
management to value investments in subsidiaries
and joint venture to be appropriate

Goodwill Impairment assessment

Template of Auditor’s Report of Life Insurance Company in Bangladesh

Key audit matter How our audit addressed the key matter
As shown in Note ----- of the financial We evaluated and challenged the composition of
statements, the directors assess the management’s future cash flow forecast and the
impairment of goodwill arising from underlying assumptions based on the historical
acquisition at the cash generating unit level performance of the business, industry-specific
using value-in-use calculation. reports and the macro economic outlook. We
assessed the projected cash flows against the
We focused on the Goodwill impairment
approved strategic and business plan of the cash
assessment because the value-in-use
generating unit.
calculations involves significant judgments
about the future results of the business and We independently assessed the reasonableness of
the discount rates applied to the future cash the five year forecast cash flows based on recent
flow forecast. actual performance and the short-term financial
approved budgets of the business.
We also challenged management’s assumptions in
relation to the:
- Long term growth rates by comparing
them to economic and industry forecasts.
- Pre-tax discount rate by assessing the cost
of capital for the company and the
comparable organizations, as well as
considering country specific factors
We found the assumptions to be consistent and in
line with our expectations. We challenged
management on the adequacy of their sensitivity
calculations. We determined that the calculations
were most sensitive to assumptions for gross
margin and the pre-tax discount rates as disclosed
in Note --- of the financial statements.
We discussed the likelihood of such a movement
and satisfied ourselves that this has been
appropriately disclosed in the financial statements.
Information Technology (IT) systems and controls
During the year, the company implemented We examined the framework of governance over
SAP, a new Enterprise Resource Planning the group’s IT organization and the controls over
(ERP) system. The new system is a fully program development and changes, access to
integrated financial accounting and reporting programs and data and IT operations, including
system. compensating controls where required.
The implementation of a new system has an We assessed and tested the design and operating
inherent risk of loss of integrity of key effectiveness of the controls over the continued
financial data being migrated, and the integrity of both the old and new systems that
breakdown in operation or monitoring of IT were relevant to financial accounting and
dependent controls within critical business reporting during the year. Where necessary we
processes such as purchasing selling and also carried out direct test of certain aspects of
recording of transaction, which could lead to the security of the Group’s IT systems including
financial errors or misstatements and access management and segregation of duties.
inaccurate financial reporting.
We re-performed selected automated
The group’s financial accounting and computations and compared our results with those
reporting systems are heavily dependent on from the system and the general ledger.
Template of Auditor’s Report of Life Insurance Company in Bangladesh

Key audit matter How our audit addressed the key matter
the new system and there is a risk that We tested the significant system interfaces to
automated accounting procedures and ensure the accuracy and completeness of the data
related IT dependent manual controls are not transfer. Our procedures included assessment and
designed and operating effectively. testing of the General IT control environment,
including IT access and segregation of duties, as
well as IT dependent controls within critical
business processes.
In relation to systems migration, we assessed and
tested the controls specifically established over
the implementation process and migration of key
financial data from the legacy to the new single
operating system, and we performed walk through
to collaborate this.
The combination of these tests of the controls and
the direct tests that we carried out gave us
sufficient evidence to enable us to rely on the
continued and proper operation of the Group’s IT
systems for the purpose of the audit of the
financial statements.
Template of Auditor’s Report of Life Insurance Company in Bangladesh

Disclaimer: This template Auditor’s Report for Life Insurance Company in Bangladesh has
been developed under the requirement of ISA 700 (revised) and examples of some Key Audit
Matters (KAM) with a view to share the idea in this regard. The sample KAM is not exhaustive
and auditors need to apply their judgement in order to identify if there are other items which
may fall under KAM. ICAB assumes no responsibility or liability whatsoever for accuracy and
completeness of this template. So, intended users may follow this template subject to required
modification at their own risk.