Free APA Practice Questions

Question 1

A metal fabricator reports $468,000 of gross wages for one workers compensation class. This includes $36,000 paid for overtime hours at time-and-a-half and $18,000 in bonuses. Receipt-supported business-expense reimbursements of $6,000 were paid separately and are not in gross wages. The applicable rules include bonuses, exclude these reimbursements, and permit deduction of the separately documented overtime premium. The rate is $2.50 per $100 of auditable payroll. What is the class's manual premium?

Accepted Answer

$11,400

Answer

$10,800

Answer

$10,950

Answer

$11,250

Question 2

An auditor suspects that a roofing contractor paid weekend crews through accounts payable, leaving their labor out of the exposure report. Which procedure most directly tests this suspected omission?

Accepted Answer

Trace accounts-payable labor disbursements to the exposure report, investigating unmatched payments.

Answer

Vouch reported payroll entries to approved employee time sheets.

Answer

Reconcile payroll-register totals with the quarterly employment-tax returns for the same insured and period.

Answer

Recalculate each reported class's payroll extension using the rate shown on the policy.

Question 3

A contractor finishes a loading-dock installation at a customer's warehouse in October 2023. It is accepted and put to its intended use that month. In February 2024, a railing installed by the contractor fails and injures a visitor; the claim is first made in May 2025. The contractor maintained consecutive calendar-year occurrence-form CGL policies with products-completed operations coverage. All other coverage and reporting conditions are satisfied. Which policy period and aggregate apply to the bodily injury?

Accepted Answer

The 2024 policy's products-completed operations aggregate

Answer

The 2023 policy's products-completed operations aggregate

Answer

The 2024 policy's general aggregate

Answer

The 2025 policy's products-completed operations aggregate

Question 4

A press operator narrowly avoids a crushing injury while reaching into an unguarded point of operation. The press is taken out of service. Eliminating the operation or substituting another process is not feasible. For the operation to resume, the insurer's risk-control specialist requires a safeguard that prevents access to the hazard without relying on the operator remembering a step on every cycle. Which proposal meets that requirement?

Accepted Answer

Install an interlocked guard that keeps hands out while the press can cycle.

Answer

Require a supervisor to observe production runs and correct unsafe hand placement.

Answer

Introduce a written clearing procedure, operator retraining, and signed daily safety checks.

Answer

Provide a long-handled tool and instruct operators to use it when clearing jams.

Question 5

A woodworking company's bookkeeper works in a physically separated office four days each week and packs finished goods in the shop on the fifth day. Contemporaneous time records distinguish the duties. The applicable standard-exception rules prohibit dividing an individual's payroll between clerical and shop classifications. How should this employee's payroll be assigned?

Accepted Answer

Assign the employee's entire payroll to the shop classification.

Answer

Use clerical for all payroll because accounting is the primary duty.

Answer

Split payroll between clerical and shop using the recorded hours.

Answer

Keep one payroll total and apply an hours-weighted blend of the two rates.

Question 6

Payroll reconciliation for one insured and one policy period shows $624,000 in gross wages in the payroll register and $606,000 in taxable wages in federal wage-tax reports. Employee-level records explain the entire difference as employee salary reductions for benefits. The applicable audit rules include those reductions in remuneration, and no other adjustments are needed. The auditor should:

Accepted Answer

Use $624,000, with the documented benefit deductions explaining the lower taxable wage total.

Answer

Use $606,000 because the tax reports were filed with a government agency.

Answer

Keep the audit open until amended tax reports agree with the gross payroll register.

Answer

Add the salary reductions to the register total because the audit rules require their inclusion in remuneration.

Question 7

A consulting firm's employee uses her own car for client visits and receives mileage reimbursement. The firm does not rent or lease the car. Its Business Auto Coverage Form shows symbols 7, 8, and 9 for liability and symbol 7 for collision. Only the firm's two vans are described for collision; no endorsement extends physical damage to employee vehicles. After an accident on a client visit, which distinction is correct for the firm's liability and damage to the employee's car?

Accepted Answer

The car qualifies as nonowned for liability, but the firm's collision coverage does not extend to the employee's car.

Answer

The car is hired because mileage is reimbursed, so its use falls within both liability and collision coverage.

Answer

The car is nonowned, so the liability and collision entries both apply whenever it is used on company business.

Answer

The car falls outside the firm's liability coverage because it is absent from the schedule of specifically described autos.

Question 8

An insurer reports a combined ratio of 104% and an overall profit after investment income. Its loss-and-loss-adjustment-expense ratio and underwriting-expense ratio both use net earned premium as their denominator. What do these results indicate?

Accepted Answer

The insurer lost money on underwriting, but investment income can offset that loss.

Answer

The insurer earned an underwriting profit because the combined ratio compares claim costs with policyholders' surplus.

Answer

The report is inconsistent because investment income is already included when calculating the combined ratio.

Answer

The underwriting result cannot be determined until all claims included in the report have been paid.

Question 9

A flooring subcontractor's employees worked for a general contractor from May through August. A certificate issued in September identifies the subcontractor's workers compensation policy as effective January 1 through December 31, with the correct legal entity and state. The insurer confirms uninterrupted coverage for the work dates. Under the principal's applicable audit rules, independently insured subcontractor employee labor is excluded when coverage for the work is verified. What treatment is supported?

Accepted Answer

Exclude the subcontractor's employee labor for all of the verified May-through-August work.

Answer

Include the labor because the certificate was issued after the work ended.

Answer

Defer the exclusion until a certificate bearing an issue date before May can be obtained.

Answer

Require additional-insured status on the subcontractor's general liability policy before allowing the workers compensation exclusion.

Question 10

To investigate underreported subcontracting, an auditor examines the 12 largest vendors and five vendors with unusual payment descriptions. Several omitted auditable labor payments are confirmed. The audit manager asks whether the error rate in these selections describes the untested vendors. What conclusion follows from the selection method?

Accepted Answer

Correct the verified omissions, but do not treat the selections as an unbiased estimate of errors among untested vendors.

Answer

Apply the observed error percentage to every vendor because the selections concentrated on the most material transactions.

Answer

Defer all confirmed corrections until every remaining vendor has been examined, since a targeted review cannot support any adjustment.

Answer

Treat the untested smaller vendors as error-free because the largest exposures and the unusual payments were already examined.

Free APA Practice Questions

Domain 1: Premium Audit Fundamentals

Question 1

Question 2

Question 3

Domain 2: Planning a Premium Audit

Question 4

Question 5

Question 6

Question 7

Question 8

Domain 3: Reviewing an Insured's Operations and Employees

Question 9

Domain 4: Evaluating an Insured's Financial Records

Question 10

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