Insurance regulators continue to talk about ways to put new internal control testing and reporting requirements in the National Association of Insurance Commissioners’ Model Audit Rule.[@@]
Efforts to update the NAIC’s Model Audit Rule could surface in June, when regulators head to Boston for the Kansas City, Mo., group’s summer meeting.
One subgroup attached to the NAIC/American Institute of Certified Public Accountants working group recently held an interim meeting to review changes to Title IV of the Model Audit Rule. Those changes, based on provisions of the Sarbanes-Oxley Act of 2002, could require insurance company managers to attest to the soundness of internal controls.
The NAIC/AICPA working group also is organizing a conference call to talk about proposed changes to Title I and Title II of the Model Audit Rule. Those changes could add provisions aimed at increasing auditor independence and improving corporate governance.
Publicly traded companies already have to comply with SOX when they file financial statements with the U.S. Securities and Exchange Commission. The amendments to the Model Audit Rule would apply mainly to mutual insurance companies and other companies that are not required to comply with SOX.
During the Title IV subgroup meeting, participants talked about taking a broad, risk-based approach to reform rather than focusing on minutiae such as petty cash controls, according to Steve Johnson, a deputy insurance commissioner from Pennsylvania who is the chairman of the Title IV subgroup.
Insurers now seem to be more willing to develop a draft, and work on Title IV revisions could begin at a mid-summer meeting in July, Johnson says.
Doug Stolte, a deputy insurance commissioner from Virginia who is chairman of the NAIC/AICPA working group, says the recent announcements about earnings restatements at American International Group Inc., New York., show the importance of incorporating elements of SOX in the NAIC’s Model Audit Rule.