UPDATE February 2005 - The draft of the amended Model Audit Rule continues being refined for Sarbanes-Oxley Act provisions. The Chair of the working group noted that the NAIC has decided that it would be “political suicide” to do nothing while Sarbanes-Oxley Act provisions become the new business standard for all other industries. The NAIC believes that the proposed provisions will strengthen the regulatory tools used to monitor insurance companies. The tone of the working group has changed from whether to adopt the changes to how best to implement them and to whom shall they apply.
As a reminder, the working group has divided the Sarbanes-Oxley Act provisions into Title II, Title III and Title IV. The sections identified to impact the insurance industry are as follows.
Title II- Auditor Independence
Section 201-Services Outside the Scope of Practice of Auditors
Section 202-Pre-approval Requirements
Section 203-Audit Partner Rotation
Section 204-Auditor Reports to Audit Committees
Section 206-Conflict of Interest
Title III-Corporate Responsibility
Section 301-Company Audit Committees
Section 303-Improper Influence on Conduct of Audits
Section 304-Forfeiture of Certain Bonuses and Profits
Title IV-Enhanced Financial Disclosures
Section 404-Managements Assessment of Internal Controls
Section 409-Real Time Issuer Disclosures
The groups working on Title II and III are near completion. The refinements have been made and will be exposed to the full working group for final comments.
The Chair for the Group working on Title IV highlighted the amendment subsections which adopt the provisions of Section 404 of the Sarbanes-Oxley Act. The Chair outlined the steps needed to finalize the amendment. The next step was to consider revision to the wording, exemption requirements, the internal control framework to be adopted, the audit standards to be adopted, and the process for NAIC guidance literature to be maintained and modified.
The target date of December 31, 2006 was discussed and the Chair noted that the provisions will probably be staggered over time to ease the implementation burden.
These developments reinforce the need for companies to prepare for the adoption of Sarbanes-Oxley Act for insurance companies. If you are interested in reviewing the March 14, 2004 draft of the Model Audit Rule as amended by the December 14, 2004 changes please request it by email to MFischer@riskinc.net.
If you have any questions regarding the adoption of Sarbanes-Oxley Act for insurance companies, please contact us at (630) 243-0117 or E-mail at MFischer@riskinc.net.