NAIC / AICPA (E) Working Group
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Joint Executive (EX) / Plenary Committee Summary Report
Fall 2009 Meeting Summaries Index

The NAIC/AICPA (E) Working Group met Sept. 22, 2009.

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 report discussed a new Statement on Auditing Standards regarding the objectives and conduct of the audit, as well as a new Statement on Auditing Standards regarding compliance audits. In addition, the report addressed the development of Statement of Position 09-1 regarding eXtensible Business Reporting Language (XBRL) and several projects of the Financial Accounting Standards Board.
• Discussed a survey of the states regarding progress toward adopting the revised Model Audit Rule. Based on the results of the survey, 31 states (Alabama, Arizona, Connecticut, Delaware, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Hampshire, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Utah, Virginia, West Virginia, Wisconsin and Wyoming) have adopted the revised requirements. In addition, four other states (Arkansas, California, Nevada and Tennessee) have publicly exposed revised statutes or regulations that incorporate the new requirements. Of the remaining states, 15 plan on adopting the revisions prior to year-end, with the other state planning to complete adoption within the first few months of 2010. NAIC staff will continue to track the progress of states in adopting the requirements, and the results will be discussed at the next national meeting.
• Discussed a referral received from the Risk Assessment Implementation (E) Subgroup regarding access to CPA workpapers when performing financial condition examinations. NAIC staff were asked to provide more detail on this issue to the CPA firm representatives.
• Discussed the impact of the Statement of Standards in Attestation Engagements No. 15 (SSAE 15) on Model Audit Rule compliance. This standard provides guidance for auditors in attesting to the effectiveness of a company's internal controls. NAIC staff were asked to consult with the legal department regarding whether the filing of an SSAE 15 report would be acceptable to satisfy Model Audit Rule requirements without formally revising the Model.
• Discussed a clarification regarding regulator expectations when insurers report on the effectiveness of internal controls over financial reporting at the group of insurers level. The Working Group agreed to expose proposed revisions to the Implementation Guide for a 30-day public comment period.
• Discussed how to report a material weakness identified for one entity within a group of insurers that is not considered a material weakness for the entire group. Members agreed that if such a situation occurs, it should be reported in Management's Report of Internal Control over Financial Reporting. Interested parties agreed to work with NAIC staff to draft guidance for this situation.
• Discussed regulator interpretations regarding what types of services would constitute bookkeeping services and be prohibited by the Model Audit Rule to be performed by the auditor. Members agreed that the production of annual statements would be considered a bookkeeping service, but that drafting the Audited Statutory Financial Statements would not be considered a bookkeeping service as long as proper controls are in place.
• Discussed revisions proposed by interested parties to one of the answers to frequently asked questions within the Implementation Guide. NAIC staff were asked to consult with the legal department on this issue. In addition, the Working Group agreed to expose the proposed changes for a 30-day comment period.
• Discussed a suggestion to develop a list of additional frequently asked questions regarding the Model Audit Rule that could be posted to the Working Group's Web page to provide additional non-authoritative guidance to insurers in complying with the Model Audit Rule. The Working Group created a MAR Interpretation Subgroup to work with interested parties in addressing Model Audit Rule interpretation questions.