Wisconsin this year has adoped new rules that define auditor qualifications and auditor independence.
The Wisconsin Office of the Commissioner of Insurance (OCI) adopted the new audit rules based on a model regulation adopted by the National Association of Insurance Commissioners.
Insurers have long been required to have their financial records audited by an independent audit firm. The rule now reduces the period the lead auditor may serve in that capacity to five years; specifies various non-audit services that, if performed by the auditor, would impair the auditor’s independence in relation to the insurer; and prohibits partners and senior managers of the audit engagement from serving as a member of the board of directors, or officer, or controller, or similar position of the insurer if employed by the independent accounting firm that audited the insurer during the one-year period which preceded the most current statutory opinion.
The rule also provides that every insurer required to file an annual audited financial report is required to have an audit committee that is directly responsible for the appointment, oversight and compensation of the auditor.
“Consumer protection is the driving force behind insurance regulation,” said Insurance Commissioner Sean Dilweg. “Consumers are the reason behind strict solvency requirements for insurance companies. With these new audit rules, consumers will have greater confidence that insurance companies will have objective and independent audits they can rely on.”
The rule requires that management of insurers with more than $500 million in premium annually file a report with the commissioner assessing internal controls over financial reporting, including a statement whether the controls are effective to provide reasonable assurance regarding the reliability of the statutory financial statements and disclosure of any unremediated material weaknesses in internal control over financial reporting.
“We all know what happened over the past decade when corporations and their auditors developed relationships that were too close for comfort,” said Dilweg. “This rule gives Wisconsin consumers regulatory reassurance that audit opinions are objective and reliable.”
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