SOFA-CFE · Question #258
The actuary tests liabilities estimated in the past with the most recent information in which testing scheme?
The correct answer is B. retrospective testing. Retrospective testing involves looking backward - an actuary takes liability estimates made in prior periods and compares them against the most recent actual data to evaluate how accurate those past estimates were. This "hindsight check" is the defining characteristic of…
Question
The actuary tests liabilities estimated in the past with the most recent information in which testing scheme?
Options
- Aorganizing testing
- Bretrospective testing
- Ctrade fair testing
- DAccrual based testing
How the community answered
(50 responses)- A4% (2)
- B82% (41)
- C12% (6)
- D2% (1)
Explanation
Retrospective testing involves looking backward - an actuary takes liability estimates made in prior periods and compares them against the most recent actual data to evaluate how accurate those past estimates were. This "hindsight check" is the defining characteristic of retrospective testing, making B the correct choice.
Why the distractors are wrong:
- A (organizing testing) is not a recognized actuarial testing methodology - it's a fabricated term.
- C (trade fair testing) has no meaning in actuarial science; it sounds plausible but does not exist as a standard scheme.
- D (accrual based testing) relates to an accounting recognition method, not a scheme for validating prior liability estimates against current data.
Memory tip: Think of "retro" as "looking back" - retrospective testing is simply the actuary going back in time to grade their old homework using today's answer key.
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