Accountants and insurers continue to ponder the definition of “independent certified public accountant” included in a proposed financial reporting model regulation.[@@]
The National Association of Insurance Commissioners, Kansas City, Mo., has been working on the model, which would require insurers over a certain size to provide annual audited financial reports, for months. The model would, in effect, require large and midsize insurers to comply with the Section 404 accounting provisions of the federal Sarbanes-Oxley Act of 2002.
SOX applies only to publicly traded stock companies. The NAIC model would cover mutual insurers and privately held insurers with stock company charters.
Financial reporting model issues coming up in discussions this week include questions about accounting firm employees who get jobs at life insurance companies.
The current version would forbid an insurer from using an auditing firm if the insurer employed any senior personnel who were employed by the auditing firm during the year preceding the audit. The model says that requirement would apply to partners and “anyone who helps set the scope or reviews others’ work on the audit.”
Regulators told Deborah Whitmore, a partner in the New York office of Ernst & Young L.L.P., New York, that the provision would not apply to junior accountants, staffers or employees brought in to answer technical questions.
Meanwhile, insurers are asking whether doctors who get claims payments from health insurers can serve on those insurers’ audit committees.
Some states have laws that require health insurers to include doctors on their audit committee, industry representatives say.