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- 2. Which of the following is an example of conversion, the misappropriation of fiduciary monies? a . premium diversion b. False statements in official filings C. issuing a fake insurance policy d. misrepresentation on an insurance applicationMisrepresentation discovered by an insurer may result in the policy being voided. Which one (1) of the following circumstances must the insurer show occurred to legally void the policy? The misrepresentation was malicious. The misrepresented fact was material to the risk. The misrepresentation was the result of extreme carelessness by the insured's broker. The misrepresented fact was the product of collusion between the insured and the broker.The party to whom payment is to be made is called the payee. True False
- Which is not an essential characteristic of an insurance contract? A. transfer of significant risk from the issuer to the policyholder B. policyholder pays the issuer for the transfer of risk C. issuer indemnifies the policyholder for losses when the insured event occurs D. none of the aboveWhich of the following statements is false?a. A contingent liability should be disclosed in the notes to the financial statements if thereis a reasonable possibility that a loss (or expense) will occur.b. All contingent liabilities should be reported as liabilities on the financial statements,even those that are unlikely to occur.c. A contingent liability is a potential obligation that depends on the future outcome of pastevents.d. A contingent liability should be accrued if the loss is probable and the amount of theloss can be reasonably estimated.Which of the following does not relate to credit risks? a. Credit risk is the possibility of losing a lender takes on due to the possibility of a borrower not paying back a loan b. It refers to the risk that a lender may not receive the owed principal and interest c. Credit risk also describes the risk that an insurance company will be able to pay a claim. d. Credit risk is the possibility of a loss resulting from a borrower's failure to repay a loan or meet contractual obligations e. Credit risk describes the risk that a bond issuer may fail to make payment when requested
- Suppose the analysis of a loss contingency indicates that an obligation is not probable. What accounting treatment if any is warranted?Which of the following is an arrangement by which one party promises to pay a sum of money to policyholder as protection against an adverse or unfavorable occurrence of event? a. Short Term Loans b. Fixed Deposit c. Insurance d. InvestmentIf the chance that a risk will occur cannot be reasonably predicted or the possible financial loss to the business calculated, it will be unlikely that an insurance company will provide coverage. True or False
- 6. Which of the following statements is true?a. No loss contingencies should be disclosed if there is just a reasonable possibility of a loss.b. Indirect guarantees should normally be accrued.c. Losses may be accrued for unasserted claims and other potential unfiled lawsuits.d. In the case of loss contingencies, accrual can be made even if the exact payee and payment date are notPayment must be probable in order for a compensated absence to be accrued. True FalseWhich of the following is not a criterion that must be met for an item to be classified as a liability? A certain cash payment will occur in the future. A sacrifice will require the entity’s assets or services. There is a probable future sacrifice. There is a present obligation that results from a past transaction.