Canadian Institute of Actuaries L’Institut canadien des actuaires 2006 Seminar for the Appointed Actuary Colloque pour l’actuaire désigné 2006

Materiality – Presentation Outline Background AAA Task Force AAA Task Force – Goals, Members, and Procedures AAA Paper – Table of Contents AAA Paper – Key Points AAA Paper – Appendix CIA Task Force CIA Task Force – Goals, Members, and Procedures CIA Task Force – Progress Report

Materiality – Background Prior US experience Unfamiliar with concept of materiality Raised questions at AA seminar Approached by CIA Property & Casualty Financial Reporting Committee All research led to US AAA Task Force CIA Task Force

Materiality – AAA Task Force Goals, Members, and Procedures Goal: Create a Discussion Paper not a Professional Standard Task Force: Members of all practice areas Members from different types of employers Conference calls every other week for 4 months Draft paper December 2005 Final paper spring 2006

Materiality – AAA Paper Table of Contents Preface Background Purpose and Scope Defining Materiality Reflecting Upon Materiality: User is Key Applying Judgment About Materiality Accounting vs. Actuarial Materiality Communication and Disclosure Appendix: Helpful Sources for Use in Selecting Materiality Levels

Materiality – AAA Paper Key Points No Standard of Practice in US on materiality Concept of materiality applies to all practice areas and all actuarial work Generalized description of materiality: An omission, understatement or overstatement in a work product is material if it is likely to affect either the user’s decision-making or the user’s reasonable expectations. User means intended audience

Materiality – AAA Paper Key Points (continued) Materiality is different from: The range of reasonable values in an actuarial estimate, and The inherent uncertainty associated with actuarial estimates User perspective is typically the key element in determination of materiality Definition of intended audience

Materiality – AAA Paper Key Points (continued) Materiality tends to be more task-specific than practice-specific Single vs. multiple levels of materiality Change in materiality from year to year Audit and actuarial materiality Communication and disclosure

Materiality – AAA Paper Appendix Peter D. Arthur (CIA) AAA ASOP CIA CSOP Court decisions FASB IAS Mary D. Miller (CLRS) CAS Committee on Valuation, Finance, and Investments NAIC SEC

Materiality – CIA Task Force Goals, Members, and Procedures Goal: Create a Discussion Paper not a Professional Standard Members: Mike Lombardi Isabelle Perigny Joel Cohen Paul Della Penna Paul McCrossan Jean-Marc Leveille Patricia Hladun Kevin Lee Randy Dutka Conference calls throughout summer – also have audit practitioner participation at times

Materiality – CIA Task Force Progress Report