Current through August 26, 2024
(1) The
commissioner may rule that an accountant or accounting firm is not qualified
for purposes of expressing an opinion on the financial statements in the annual
audited financial report required under this subchapter and prohibit insurers
from retaining the accountant or an accounting firm, and require insurers to
replace the accountant or accounting firm, if the commissioner finds there is
cause, including, but not limited to, a finding that the accountant or
accounting firm:
(a) Is not in good standing
with the American institute of certified public accountants and in all states
in which the accountant or accounting firm is, or is required to be, licensed
to practice, or, for a Canadian or British company, that it is not a chartered
accountant;
(am) Has either
directly or indirectly entered into an agreement of indemnification with
respect to the audit of the insurer;
(b) Has not conformed to the standards of the
accounting profession as contained in the code of professional ethics of the
American institute of certified public accountants and rules and regulations
and code of ethics and rules of professional conduct of the accounting
examining board, or a similar code;
(c) Has been convicted of fraud, bribery, a
violation of the Racketeer Influenced and Corrupt Organizations Act, to, or
any dishonest conduct or practices under federal or state law;
(d) Has been found to have violated the
insurance laws or rules of this state; or
(e) Has demonstrated a pattern or practice of
failing to detect or disclose material information in financial
reports.
(2) After
December 31, 1994, and prior to January 1, 2010, no accounting firm partner or
other person responsible for rendering a report required of an independent
certified public accountant may act in that capacity for more than 7
consecutive years. Following any period of service such a 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 2 years. Effective
January 1, 2010, the lead or coordinating audit partner having primary
responsibility for the audit may not act in that capacity for more than 5
consecutive years, including consecutive years immediately preceding January 1,
2010, and 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 rotation requirement on the basis of unusual circumstances. The
application should be made at least thirty days before the end of the calendar
year. Factors the commissioner may consider in determining if the relief should
be granted include, but are not limited to:
(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.
(3) The insurer shall file with its annual
statement filing the approval for relief from sub. (2) 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)
(a) The
commissioner shall not recognize as a qualified independent certified public
accountant a person who, or accept an annual audited financial report prepared
in whole or in part by a person who, provides to an insurer, contemporaneously
with the audit, the following non-audit services:
1. Bookkeeping or other services related to
the accounting records or financial statements of the insurer.
2. Financial information systems design and
implementation.
3. Appraisal or
valuation services, fairness opinions, or contribution in-kind
reports.
4. Actuarially-oriented
advisory services involving the determination of amounts reported 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:
a. Neither
the accountant nor the accountant's actuary has performed any management
functions or made any management decisions;
b. The insurer has competent personnel, or
engages a third party actuary, to estimate the reserves for which management
takes responsibility; and
c. The
accountant's actuary tests the reasonableness of the reserves after the
insurer's management has determined the amount of the reserves;
5. Internal audit outsourcing
services.
6. Management functions
or human resources.
7. Broker or
dealer, investment advisor, or investment banking services.
8. Legal services or expert services
unrelated to the audit.
9. Any
other services that the commissioner determines are impermissible. The
commissioner may consider utilizing the guidance provided in the Securities and
Exchange Commission Final Rule No. 33-8183, Strengthening the Commission's
Requirements Regarding Auditor Independence, adopted January 28, 2003, in order
to evaluate whether the provision of such services impairs the independence of
the accountant.
(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 the accountant's own work, and cannot serve in
an advocacy role for the insurer.
(5) Insurers having direct written and
assumed premiums of less than $ 100,000,000 in any calendar year may request an
exemption from sub. (4) (a). The insurer shall file with the commissioner a
written statement discussing the reasons why the insurer should be exempt from
the provisions. If the commissioner finds upon review of the statement that
compliance with sub. (4) (a) would constitute a financial or organizational
hardship upon the insurer, an exemption may be granted.
(6) 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 sub. (4) (a) or that do not
conflict with sub. (4) (b), only if the activity is approved in advance by the
audit committee, in accordance with sub. (7), provided that the audit committee
is in compliance with the Securities and Exchange Commission Final Rule
33-8183, Strengthening the Commission's Requirements Regarding Auditor
Independence, adopted January 28, 2003.
(7) 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:
(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;
(b) The services were not recognized by the
insurer at the time of the engagement to be non-audit services; and
(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 members of the board of directors to whom authority to grant the
approvals has been delegated by the audit committee.
(8) The audit committee may delegate to one
or more designated members of the audit committee the authority to grant the
preapprovals required by sub. (7). The decisions of any member to whom the
authority is delegated shall be presented to the full audit committee at each
of its scheduled meetings.
(9)
(a) 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 the insurer, was employed by the independent certified
public accountant and participated in the audit of the insurer during the
one-year period preceding the date that the most current statutory opinion is
due. This paragraph shall only apply to partners and senior managers involved
in the audit. An insurer may make application to the commissioner for relief
from the requirement of this paragraph on the basis of unusual
circumstances.
(b) The insurer
shall file with its annual statement filing the approval for relief from par.
(a) 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.
