NAIC/AICPA (E) Working Group
October 1, 2007

The NAIC/AICPA Working Group of the Financial Condition (E) Committee met on Monday, October 1, 2007.

During this meeting, the Working Group:

• Received a report from the American Institute of Certified Public Accountants (AICPA) regarding projects that affect state insurance regulators and the insurance industry. The AICPA staff discussed progress in revising AU Section 325, Communicating Internal Control Related Matters Identified in an Audit, as well as AT Section 501, Reporting on an Entity’s Internal Control Over Financial Reporting in response to the Public Company Accounting Oversight Board’s (PCAOB) adoption of Auditing Standard No. 5. In addition, the report discussed the progress of the AICPA’s Clarity Project and SOP 07-2 Attestation Engagements That Address Specified Compliance Control Objectives and Related Controls at Entities That Provide Services to Investment Companies, Investment Advisers, or Other Service Providers.

• Discussed a survey of the states regarding their progress of adopting the revised Model Audit Rule requirements. Based on the results of the survey, approximately 6 states plan on having the revisions in place (or at least starting the process) in 2007. It should be noted that the effective date of the revisions will not be until 2010. NAIC staff will continue to update this survey on a quarterly basis, and the results will be discussed at each of the National Meetings.

• Received a presentation on the PCAOB’s Auditing Standard No. 5 (AS 5), An Audit of Internal Control Over Financial Reporting That Is Integrated with An Audit of Financial Statements. The Working Group requested the AICPA to keep them abreast of any developments regarding the differences in the definitions of significant deficiencies and material weaknesses between the AICPA’s guidance and PCAOB’s AS 5.

Action Items:

None