Code of Massachusetts Regulations
211 CMR - DIVISION OF INSURANCE
Title 211 CMR 26.00 - Annual Financial Reporting For Years Ending 2010 And After
Section 26.08 - Qualifications of Independent Certified Public Accountant
Current through Register 1531, September 27, 2024
(1) The Commissioner shall not recognize any person or firm as a qualified independent certified public accountant if the person or firm:
(2) Except as otherwise provided in 211 CMR 26.00, the Commissioner shall recognize an independent certified public accountant as independent and 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 Massachusetts Board of Public Accountancy (or similar code).
(3) 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 after he or she stops acting in that capacity. 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:
The insurer shall file, with its annual statement filing, the approval for relief from 211 CMR 26.08(3) 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.
(4) The Commissioner shall neither recognize as a qualified independent certified public accountant, nor accept any annual Audited financial report, prepared in whole or in part by, any natural person who:
(5) 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 M.G.L. c. 175 § 6; M.G.L. c. 175, § 180A et seq.; or M.G.L. c. 176G, § 20, the mediation or arbitration provisions shall operate at the option of the receiver or statutory successor.
(6) The Commissioner may hold a hearing to determine whether an independent certified public accountant is qualified under 211 CMR 26.00, whether the accountant is independent, whether an audit performed by the accountant conforms to generally accepted auditing standards, or whether the annual audited financial report on which the accountant has given an opinion presents fairly the financial position and results of operations of the insurer and, considering the evidence presented, may rule that the independent certified public accountant is not qualified under 211 CMR 26.00, is not independent for purposes of expressing his or her opinion on the financial statements in the annual Audited financial report made pursuant to 211 CMR 26.00, did not conduct the audit in accordance with generally accepted auditing standards or that the annual Audited financial report on which the accountant gave his opinion did not fairly present the financial position and results of operations of the insurer. After such finding, the Commissioner may require the insurer to replace the accountant.
(7) 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 an accountant who provides to an insurer, contemporaneously with the audit, the following non-audit services:
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.
(8) Insurers having direct written and assumed premiums of less than $100,000,000 in any calendar year may request an exemption from the provisions of 211 CMR 26.08(7). The insurer shall file with the Commissioner a written statement discussing the reasons why the insurer should be exempt from 211 CMR 26.08(7). If the Commissioner finds, upon review of this statement, that compliance with 211 CMR 26.00 would constitute a financial or organizational hardship upon the insurer, an exemption may be granted.
(9) 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 211 CMR 26.08(7), or that do not conflict with 211 CMR 26.08(7), only if the activity is approved in advance by the Audit committee, in accordance with 211 CMR 26.08(10).
(10) 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:
(11) The Audit committee may delegate to one or more designated members of the Audit committee the authority to grant the preapprovals and the approvals required by 211 CMR 26.08(10). 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.
(12) 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. 211 CMR 26.08(12) 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.
(13) The insurer shall file, with its annual statement filing, the approval for relief from 211 CMR 26.08(12) with the states that it is licensed in or doing business in and 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.