Ga. Comp. R. & Regs. R. 120-2-60-.07 - Qualifications of Independent Certified Public Accountant
(1) The
Commissioner shall not recognize any person or firm as a qualified independent
certified public accountant if that person or firm:
(a) 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
(b) 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.
(2) Except as otherwise provided
herein, an independent certified public accountant shall be recognized 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 of
the Georgia Board of Public Accountancy, or similar code.
(3) 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 Chapter
37 of the Georgia Insurance Code, the mediation or arbitration provisions shall
operate at the option of the statutory successor.
(4) The lead (or coordinating) audit partner,
having primary responsibility for the audit, may not act in that capacity for
more than five (5) consecutive years. Following any period of service such
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 five
(5) 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 thirty (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.
(5) The insurer shall file, with its annual
statement filing, the approval for relief from paragraph 4 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.
(6) The Commissioner shall not recognize as a
qualified independent certified public accountant, nor accept any annual
Audited financial report, prepared in whole or in part by, any natural person
who:
(a) Has been convicted of fraud,
bribery, a violation of the Racketeer Influenced and Corrupt Organizations Act,
18 U.S.C. Section
1961-
1968, or any dishonest conduct or
practices under federal or state law;
(b) Has been found to have violated the
insurance laws of this state with respect to any previous reports submitted
under this rule; or
(c) Has
demonstrated a pattern or practice of failing to detect or disclose material
information in previous reports filed under the provisions of this
rule.
(7) The
Commissioner, as provided in Chapter 2 of Title 33 of the Official Code of
Georgia Annotated and the applicable Rules and Regulations of the Georgia
Insurance Department, may 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 regulation and require the insurer to
replace the accountant with another whose relationship with the insurer is
qualified within the meaning of this regulation.
(8) 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 regulation, are
impermissible.
(9) 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 his or her own work, and cannot serve in an
advocacy role for the insurer.
(10)
Insurers having direct written and assumed premiums of less than $100,000,000
in any calendar year may request an exemption from paragraph 8. 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 regulation would
constitute a financial or organizational hardship upon the insurer, an
exemption may be granted.
(11) 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 paragraph 8 or that do not conflict with paragraph 9, only if the
activity is approved in advance by the Audit committee, in accordance with
paragraph 12.
(12) 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 the members of the board of directors to whom authority to grant such
approvals has been delegated by the Audit committee.
(13) The Audit committee may delegate to one
or more designated members of the Audit committee the authority to grant the
preapprovals required by paragraph 12. 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.
(14) 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.
(15) The insurer shall file, with its annual
statement filing, the approval for relief from paragraph 14 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.
Notes
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