The refund of insurance premium may be because of earlier provisional payment of premium or may be a policy might have been cancelled at a later date. The auditor should take following steps while vouching such refunds :
- Ascertain the reasons for refund of insurance premium.
- Examine insurance policy or cover note to find out the amount of premium.
- Verify advice of refund received from the insurance company. When refund is admitted, the insurance company sends the advice. This will be an evidence as a covering letter to the cheque for the refund. Sometimes, a cheque is issued after a receipt is sent in advance to the insurance company.
- Scrutinise correspondence between the insurance company and the client.
- Check entries in the bank book or the bank statement. If necessary counterfoil of the pay-in-slips can also be verified.