Current through Register Vol. 50, No. 9, September 20, 2024
A. The commissioner shall not recognize a
person or firm as a qualified independent certified public accountant if the
person or firm:
1. is not in good standing
with the AICPA and in all states in which the accountant is licensed to
practice, or, for a Canadian or British company, that is not a chartered
accountant; or
2. has either
directly or indirectly entered into an agreement of indemnity or release from
liability, collectively referred to as indemnification, with
respect to the audit of the insurer.
B. Except as otherwise provided in Regulation
98, the commissioner shall recognize an independent certified public accountant
as qualified as long as he or she conforms to the standards of his or her
profession, as contained in the Code of Professional Ethics of the AICPA and
Rules and Regulations and Code of Ethics and Rules of Professional Conduct of
the State Board of Certified Public Accountants of Louisiana and the Society of
Louisiana Certified Public Accountants, or similar code.
C. A qualified independent certified public
accountant may enter into an agreement with an insurer to have disputes
relating to an audit resolved by mediation or arbitration. However, in the
event of a delinquency proceeding commenced against the insurer under
R.S.
22:2001 et seq., the mediation or arbitration
provisions shall operate at the option of the statutory successor.
D.
1. The
lead or coordinating audit partner having primary responsibility for the audit
may not act in that capacity for more than five consecutive years. The person
shall be disqualified from acting in that or a similar capacity for the same
company or its insurance subsidiaries or affiliates for a period of five
consecutive years. An insurer may make application to the commissioner for
relief from the above rotation requirement on the basis of unusual
circumstances. This application should be made at least 30 days before the end
of the calendar year. The commissioner may consider the following factors in
determining if the relief should be granted:
a. number of partners, expertise of the
partners or the number of insurance clients in the currently registered
firm;
b. premium volume of the
insurer; or
c. number of
jurisdictions in which the insurer transacts business.
2. The insurer shall file, with its annual
statement filing, the approval for relief from
§13713. D.1 with the
states that it is licensed in or doing business in and with the NAIC. If the
nondomestic state accepts electronic filing with the NAIC, the insurer shall
file the approval in an electronic format acceptable to the NAIC.
E. The commissioner shall neither
recognize as a qualified independent certified public accountant, nor accept an
annual audited financial report, prepared in whole or in part by, a natural
person who:
1. has been convicted of fraud,
bribery, a violation of the Racketeer Influenced and Corrupt Organizations Act,
18 U.S.C. Sections 1961 to
1968, or any dishonest conduct or practices under federal or state
law;
2. has been found to have
violated the insurance laws of this state with respect to any previous reports
submitted under Regulation 98; or
3. has demonstrated a pattern or practice of
failing to detect or disclose material information in previous reports filed
under the provisions of Regulation 98.
F. The insurer, as provided in accordance
with the requirements of the Administrative Procedure Act,
R.S.
49:950 et seq., may request a hearing to
determine whether an independent certified public accountant is
qualified.
G.
1. The commissioner shall not recognize as a
qualified independent certified public accountant, nor accept an annual audited
financial report, prepared in whole or in part by an accountant who provides to
an insurer, contemporaneously with the audit, the following non-audit services:
a. bookkeeping or other services related to
the accounting records or financial statements of the insurer;
b. financial information systems and design
and implementation;
c. appraisal or
valuation services, fairness opinions, or contribution-in-kind
reports;
d. actuarially-oriented
advisory services involving the determination of amounts recorded in the
financial statements. The accountant may assist an insurer in understanding the
methods, assumptions and input used in the determination of amounts recorded in
the financial statement only if it is reasonable to conclude that the services
provided will not be subject to audit procedures during an audit of the
insurer's financial statements. An accountant's actuary may also issue an
actuarial opinion or certification (opinion) on an insurer's reserves if the
following conditions have been met:
i. neither
the accountant nor the accountant's actuary has performed any management
functions or made any management decisions;
ii. the insurer has competent personnel or
engages a third party actuary to estimate the reserves for which management
takes responsibility; and
iii. the
accountant's actuary tests the reasonableness of the reserves after the
insurer's management has determined the amount of the reserves;
e. internal audit outsourcing
services;
f. management functions
or human resources;
g. broker or
dealer, investment adviser, or investment banking services;
h. legal services or expert services
unrelated to the audit; or
i. any
other services that the commissioner determines, by regulation, are
impermissible.
2. In
general, the principles of independence with respect to services provided by
the qualified independent certified public accountant are largely predicated on
three basic principles, violations of which would impair the accountant's
independence. The principles are that the accountant cannot function in the
role of management, cannot audit his or her own work, and cannot serve in an
advocacy role for the insurer.
H. Insurers having direct written and assumed
premiums of less than $100,000,000 in any calendar year may request an
exemption from
§13713. G.1 The
insurer shall file with the commissioner a written statement discussing the
reasons why the insurer should be exempt from these provisions. If the
commissioner finds, upon review of this statement, that compliance with
Regulation 98 would constitute a financial or organizational hardship upon the
insurer, an exemption may be granted.
I. A qualified independent certified public
accountant who performs the audit may engage in other non-audit services,
including tax services, that are not described in
§13713. G.1 or that
do not conflict with
§13713. G 2, only if
the activity is approved in advance by the audit committee in accordance with
§13713. J
J. All auditing services and non-audit
services provided to an insurer by the qualified independent certified public
accountant of the insurer shall be preapproved by the audit committee The
preapproval requirement is waived with respect to non-audit services if the
insurer is a SOX Compliant Entity or a direct or indirect wholly-owned
subsidiary of a SOX Compliant Entity or:
1.
the aggregate amount of all such non-audit services provided to the insurer
constitutes not more than 5 percent of the total amount of fees paid by the
insurer to its qualified independent certified public accountant during the
fiscal year in which the non-audit services are provided;
2. the services were not recognized by the
insurer at the time of the engagement to be non-audit services; and
3. the services are promptly brought to the
attention of the audit committee and approved prior to the completion of the
audit by the audit committee or by one or more members of the audit committee
who are the members of the board of directors to whom authority to grant such
approvals has been delegated by the audit committee.
K. The audit committee may delegate to one or
more designated members of the audit committee the authority to grant the
preapprovals required by
§13713. J The
decisions of any member to whom this authority is delegated shall be presented
to the full audit committee at each of its scheduled meetings.
L.
1. The
commissioner shall not recognize an independent certified public accountant as
qualified for a particular insurer if a member of the board, president, chief
executive officer, controller, chief financial officer, chief accounting
officer, or any person serving in an equivalent position for that insurer, was
employed by the independent certified public accountant and participated in the
audit of that insurer during the one-year period preceding the date that the
most current statutory opinion is due. Paragraph L.1 shall only apply to
partners and senior managers involved in the audit. An insurer may make
application to the commissioner for relief from the above requirement on the
basis of unusual circumstances.
2.
The insurer shall file, with its annual statement filing, the approval for
relief from
§13713. L.1 with the
states that it is licensed in or doing business in and with the NAIC. If the
non-domestic state accepts electronic filing with the NAIC, the insurer shall
file the approval in an electronic format acceptable to the NAIC.
AUTHORITY NOTE:
Promulgated in accordance with
R.S.
22:1 et seq., the "Audited Financial Reports
Law"R.S. 22:671 et seq., more
particularly
R.S.
22:675 and the Administrative Procedure Act.
R.S.
49:950 et
seq.
