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

The NAIC/AICPA (E) Working Group met Dec. 6, 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 the Auditing Standards Board’s adoption of clarity drafting conventions to six Statements of Auditing Standards related to risk assessment.The report also discussed new Statement on Auditing Standards that have recently been proposed in the areas of audit engagement letters and written representations to be obtained during an audit.

• Discussed a survey of the states regarding progress toward adopting the revised Model Audit Rule. Based on the results of the survey, 36 states have adopted the revised requirements. Of the remaining states, 13 plan on adopting all of the revisions prior to year-end, with the other two states completing adoption within the first few months of 2010.

• Discussed the opinion of the NAIC legal department regarding reliance on the Statement of Standards in Attestation Engagements No. 15 (SSAE 15) in relation to Model Audit Rule compliance requirements. SSAE 15 provides guidance for auditors in attesting to the effectiveness of a company’s internal controls. The opinion of the NAIC legal department indicated that as long as an SSAE 15 report complies with and contains the same information as is required in Management’s Report of Internal Control over Financial Reporting outlined in the Model, that the SSAE 15 report could be filed along with an addendum without adjusting the Model language. As such, the Working Group adopted guidance for inclusion in the Implementation Guide indicating that an SSAE 15 report may be filed with an addendum to comply with the Model Audit Rule requirements regarding Management’s Report of Internal Control over Financial Reporting.

• Discussed comments received, including an alternate proposal, in response to the exposure of proposed changes to the Implementation Guide regarding regulator expectations when insurers report on the effectiveness of internal controls over financial reporting at the group of insurers level. The alternate proposal was adopted by the Working Group for inclusion in the Implementation Guide.

• Adopted regulator interpretations regarding bookkeeping services prohibited by the Model Audit Rule for inclusion in the Implementation Guide.

• Discussed the opinion of the NAIC legal department regarding revisions proposed by interested parties to FAQ #5 on audit partner rotation in the Implementation Guide. As the NAIC legal department concluded that such revisions would directly conflict with language included within the Model Audit Rule, an alternate proposal was presented by interested parties proposing guidance for regulators to consider in granting waivers in this area. This alternate guidance was adopted by the Working Group for inclusion in the Implementation Guide.

• Agreed to send a referral to the Financial Examiners Handbook (E) Technical Group regarding notification of an insurance company and its external audit firm of an upcoming examination.