Current through September 17, 2024
007.01 The Director
shall not recognize any person or firm as a qualified independent certified
public accountant if the person or firm:
007.01(a) 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
007.01(b) 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.
007.02 Except
as otherwise provided herein, the Director 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 Nebraska Board of Public Accountancy, or similar
code.
007.03 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 Neb. Rev. Stat.
§
44-4801
et. seq., the mediation or arbitration provisions shall operate at the option
of the statutory successor.
007.04
007.04(a) The lead (or coordinating) audit
partner (having primary responsibility for the audit) may not act in that
capacity for more than five (5) 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 (5) consecutive
years. An Insurer may make application to the Director for relief from the
above rotation requirement on the basis of unusual circumstances. This
application should be made at least thirty (30) days before the end of the
calendar year. The Director may consider the following factors in determining
if the relief should be granted:
007.04(a)(i)
Number of partners, expertise of the partners or the number of insurance
clients in the currently registered firm;
007.04(a)(ii) Premium volume of the Insurer;
or
007.03(a)(iii) Number of
jurisdictions in which the Insurer transacts business.
007.04(b) The Insurer shall file, with its
annual statement filing, the approval for relief from Section
007.04(a) 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.
007.05 The Director
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:
007.05(a) Has
been convicted of fraud, bribery, a violation of the Racketeer Influenced and
Corrupt Organizations Act, 18 U.S.C. Sections 1961-1968, or any dishonest
conduct or practices under federal or state law;
007.05(b) Has been found to have violated the
insurance laws of this state with respect to any previous reports submitted
under this Rule; or
007.05(c) Has
demonstrated a pattern or practice of failing to detect or disclose material
information in previous reports filed under the provisions of this
Rule.
007.06 The
Director of Insurance may hold a hearing in accordance with the provisions of
the Nebraska Administrative Procedure Act, Neb. Rev.
Stat. §
84-901
et. seq., and Title 210, Nebraska Administrative Code, Chapter 26, to determine
whether an independent certified public accountant is qualified and,
considering the evidence presented, may rule that the accountant is not
qualified for purposes of expressing his or her opinion of the financial
statements in the annual Audited financial report made pursuant to this Rule
and require the Insurer to replace the accountant with another whose
relationship with the Insurer is independent within the meaning of this
Rule.
007.07
007.07(a) The Director 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:
007.07(a)(i) Bookkeeping
or other services related to the accounting records or financial statements of
the Insurer;
007.07(a)(ii)
Financial information systems design and implementation;
007.07(a)(iii) Appraisal or valuation
services, fairness opinions, or contribution-in-kind reports;
007.07(a)(iv) 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 inputs 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:
007.07(a)(iv)(1) Neither the accountant nor
the accountant's actuary has performed any management functions or made any
management decisions;
007.07(a)(iv)(2) The Insurer has competent
personnel (or engages a third party actuary) to estimate the reserves for which
management takes responsibility; and
007.07(a)(iv)(3) The accountant's actuary
tests the reasonableness of the reserves after the Insurer's management has
determined the amount of the reserves;
007.07(a)(v) Internal audit outsourcing
services;
007.07(a)(vi) Management
functions or human resources;
007.07(a)(vii) Broker or dealer, investment
adviser, or investment banking services;
007.07(a)(viii) Legal services or expert
services unrelated to the audit; or
007.07(a)(ix) Any other services that the
Director determines, by regulation, are impermissible.
007.07(b) 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.
007.08 Insurers having direct written and
assumed premiums of less than $100,000,000 in any calendar year may request an
exemption from Section
007.07(a). The
Insurer shall file with the Director a written statement discussing the reasons
why the Insurer should be exempt from these provisions. If the Director finds,
upon review of this statement, that compliance with this Rule would constitute
a financial or organizational hardship upon the Insurer, an exemption may be
granted.
007.09 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
Section
007.07(a) or that
do not conflict with Section
007.07(b), only
if the activity is approved in advance by the Audit committee, in accordance
with Section 007.10.
007.10 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:
007.10(a) The aggregate amount of all such
non-audit services provided to the Insurer constitutes not more than five
percent (5%) 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;
007.10(b) The services were not recognized by
the Insurer at the time of the engagement to be non-audit services;
and
007.10(c) 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.
007.11 The
Audit committee may delegate to one or more designated members of the Audit
committee the authority to grant the preapprovals required by Section 007.10.
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.
007.12
007.12(a) The Director 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. This section shall only apply to partners and senior managers involved in
the audit. An Insurer may make application to the Director for relief from the
above requirement on the basis of unusual
circumstances.
007.12(b) The Insurer shall file, with its
annual statement filing, the approval for relief from Section
007.12(a) 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.
