Code of Massachusetts Regulations
211 CMR - DIVISION OF INSURANCE
Title 211 CMR 26.00 - Annual Financial Reporting For Years Ending 2010 And After
Section 26.04 - Definitions

The terms and definitions in 211 CMR 26.04 are intended to provide definitional guidance as the terms are used in 211 CMR 26.00.

Accountant and Independent Certified Public Accountant. An independent certified public accountant or accounting firm licensed to practice in the Commonwealth of Massachusetts or in any state with similar licensing requirements and a member in good standing of the American Institute of Certified Public Accountants (AICPA) and in all states in which he or she is licensed to practice; for Canadian and British companies, it means a Canadian-chartered or British-chartered accountant.

Affiliate of, or Person Affiliated with, a Specific Person. 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.

Audit Committee. 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, the Internal audit function of an insurer or Group of insurers (if applicable), and external 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 211 CMR 26.00 at the election of the controlling person. Refer to 211 CMR 26.16(5) 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.

Audited Financial Report. Those items specified in 211 CMR 26.06.

Commissioner. The Commissioner of Insurance or his or her designee.

Division. The Division of Insurance of the Commonwealth of Massachusetts.

Group of Insurers. Those licensed insurers included in the reporting requirements of M.G.L. c. 175, §§ 206 through 206D, and 211 CMR 7.00: Massachusetts Insurance Holding Company System, or a set of insurers as identified by management, for the purpose of assessing the effectiveness of Internal controls over financial reporting.

Indemnification. 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.

Independent Board Member. This term has the same meaning as described in 211 CMR 26.16(3).

Insurer. Any insurance company doing business in the Commonwealth of Massachusetts under M.G.L. c. 175 including, but not limited to, all life, accident and health, property and liability, title, "b" reinsurers and surplus line companies regulated by the Division of Insurance of the Commonwealth of Massachusetts. Insurer also shall include reciprocal insurance exchanges as defined in M.G.L. c. 175, § 94A, and health maintenance organizations ("HMO") doing business in Massachusetts.

Internal Audit Function. A person or persons that provide independent, objective and reasonable assurance designed to add value and improve an organization's operations and accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.

Internal Control over Financial Reporting: 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 211 CMR 26.06(2) through (7), and includes those policies and procedures that:

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

(b) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements, i.e., those items specified in 211 CMR 26.06(2) through (7), and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and

(c) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the audited financial statements, i.e., those items specified in 211 CMR 26.06(2) through (7).

NAIC. The National Association of Insurance Commissioners.

SEC. The United States Securities and Exchange Commission.

Section 404. Sarbanes-Oxley Act of 2002 § 404 and the SEC's rules and regulations promulgated thereunder.

Section 404 Report. 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 as described in the definition of Accountant and Independent Certified Public Accountant.

SOX. The Sarbanes-Oxley Act of 2002.

SOX Compliant Entity. 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:

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

(b) the Audit committee independence requirements of §301 (§ 10A(m)(3) of the Securities Exchange Act of 1934); and

(c) the Internal control over financial reporting requirements of § 404 (Item 308 of SEC Regulation S-K).

Workpapers. The records kept by the independent certified public accountant of the procedures followed, the tests performed, the information obtained, and the conclusions reached pertinent to his or her audit of the financial statements of an insurer. Workpapers may include, but are not limited to, audit planning documentation, work programs, analyses, memoranda, letters of confirmation and representation, reconciliations, flow charts, abstracts of company documents and schedules or commentaries, copies of company records or other documents prepared or obtained by the independent certified public accountant in the course of his or her audit of the financial statements of an insurer and which support the accountant's opinion.