California Code of Regulations
Title 10 - Investment
Chapter 5 - Insurance Commissioner
Subchapter 3 - Insurers
Article 3.3 - Annual Financial Reporting
Section 2309.3 - Definitions

Universal Citation: 10 CA Code of Regs 2309.3

Current through Register 2024 Notice Reg. No. 38, September 20, 2024

The terms and definitions contained herein are intended to provide definitional guidance as the terms are used within these regulations.

(a) "Accountant" or "independent certified public accountant" means an independent certified public accountant or accounting firm in good standing with the American Institute of Certified Public Accountants (AICPA) and in all states in which the independent certified public accounting or accounting firm is licensed to practice; for Canadian and British companies, it means a Canadian-chartered or British-chartered accountant.

(b) An "affiliate" of, or person "affiliated" with, a specific person, is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.

(c) "Audit Committee" means a committee (or equivalent body) established by the board of directors of an entity for the purpose of overseeing the accounting and financial reporting processes of an insurer or group of insurers, and audits of financial statements of the insurer or group of insurers. The Audit Committee of any entity that controls a group of insurers may be deemed to be the Audit Committee for one or more of these controlled insurers solely for the purposes of these regulations at the election of the controlling person. Refer to Section 2309.14(e) for exercising this election. If an Audit Committee is not designated by the insurer, the insurer's entire board of directors shall constitute the Audit Committee.

(d) "Audited financial report" means and includes those items specified in 2309.5 of these regulations.

(e) "Indemnification" means an agreement of indemnity or a release from liability where the intent or effect is to shift or limit in any manner the potential liability of the person or firm for failure to adhere to applicable auditing or professional standards, whether or not resulting in part from knowing of other misrepresentations made by the insurer or its representatives.

(f) "Independent board member" has the same meaning as described in 2309.14(c).

(g) "Insurer" means an insurer admitted to transact business in this state.

(h) "Group of insurers" means those licensed insurers included in the reporting requirements of California Insurance Code section 1215, et seq., or a set of insurers as identified by management, for the purpose of assessing the effectiveness of internal control over financial reporting.

(i) "Internal control over financial reporting" means a process effected by an entity's board of directors, management and other personnel designed to provide reasonable assurance regarding the reliability of the financial statements, i.e., those items specified in 2309.5(b) through 2309.5(g) of these regulations and includes those policies and procedures that:

(1) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets;

(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements, i.e., those items specified in 2309.5(b) through 2309.5(g) of these regulations and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and

(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements, i.e., those items specified in 2309.5(b) through 2309.5(g) of these regulations.

(j) "SEC" means the United States Securities and Exchange Commission.

(k) "Section 404" means Section 404 of the Sarbanes-Oxley Act of 2002 and the SEC's rules and regulations promulgated thereunder.

(l) "Section 404 Report" means management's report on "internal control over financial reporting" as defined by the SEC and the related attestation report of the independent certified public accountant.

(m) "SOX Compliant Entity" means an entity that either is required to be compliant with, or voluntarily is compliant with, all of the following provisions of the Sarbanes-Oxley Act of 2002:

(i) the preapproval requirements of Section 201 (Section 10 A(i) of the Securities Exchange Act of 1934);

(ii) the Audit Committee independence requirements of Section 301 (Section 10 A(m)(3) of the Securities Exchange Act of 1934); and

(iii) the internal control over financial reporting requirements of Section 404 (Item 308 of SEC Regulation S-K).

1. New section filed 12-7-2009; operative 1-1-2010 pursuant to Government <Code section 11343.4 (Register 2009, No. 50).
2. Change without regulatory effect amending subsection (a) filed 7-14-2021 pursuant to section 100, title 1, California Code of Regulations (Register 2021, No. 29). Filing deadline specified in Government Code section 11349.3(a) extended 60 calendar days pursuant to Executive Order N-40-20.

Note: Authority cited: Section 900.2, Insurance Code. Reference: Sections 900.2 and 1215, Insurance Code.

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