Current through Register No. 40, October 3, 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 this
rule, 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
under RSA 309-B New Hampshire accountancy act.
(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 RSA
402-C, 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 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 5 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; and
(2) The insurer shall file, with its annual
statement filing, the approval for relief from (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 this rule; or
(3) Has
demonstrated a pattern or practice of failing to detect or disclose material
information in previous reports filed under the provisions of this
rule.
(f) The
commissioner, pursuant to the provisions of Ins 2400, may, as provided in
RSA 400-A:17, hold a
hearing 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 on 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 qualified within the meaning of this
rule.
(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 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 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:
1.
Neither the accountant nor the accountant's actuary has performed any
management functions or made any management decisions;
2. The insurer has competent personnel, or
engages a third party actuary, to estimate the reserves for which management
takes responsibility; and
3. 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 rule, 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
3 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 (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 this rule 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 (g)(1) or that do not
conflict with (g)(2), only if the activity is approved in advance by the audit
committee, in accordance with (j) below.
(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 compliance 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 (j) above. 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. This section 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; and
(2) The insurer shall file, with its annual
statement filing, the approval for relief from (l)(1) 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.
#9246, eff 1-1-09
