Section Ins 50.08 (1), Wis. Adm. Code, defines the standards under which the Commissioner will find an accountant or accounting firm as not qualified for the purposes of expressing an opinion on an insurer's financial statements in the required annual audited financial report. The newly created paragraphs create additional criterion for disqualification related to the existence of an indemnification agreement between the insurer and the accountant or accounting firm.
Ins 50.08 (1) (am) was created to read:
Ins 50.08 (1) (am) Has either directly or indirectly entered into an agreement of indemnification with respect to the audit of the insurer;
Ins 50.01 (4m) was created to read:
Ins 50.01 (4m) "Indemnification" means an agreement of indemnity or a release from liability where the intent or effect is to shift or limit in any manner the potential liability of the person or firm for failure to adhere to applicable auditing or professional standards, whether or not resulting in part from knowing or other misrepresentation made by the insurer or its representatives.
The foregoing rule amendment became effective on
October 1, 2007. These changes bring the Wisconsin rule into conformity with standards established by the National Association of Insurance Commissioners (NAIC).
Pursuant to s. Ins 50.08 (1), Wis. Adm. Code, this office will not accept audit reports prepared by persons who are not qualified in satisfaction of the requirements of s. Ins 50.05, Wis. Adm. Code.
Furthermore, insurers are required to submit annually their accountants' letter of qualifications with the filing of the annual audited financial report required under s. Ins 50.05, Wis. Adm. Code.
Under s. Ins 50.13, Wis. Adm. Code, the letter must include a representation that the accountant is not subject to disqualification, including disqualification because the insurer has entered into an indemnification agreement subject to s. Ins 50.08 (1) (am), Wis. Adm. Code.
Insurers should review their CPA Audit Engagement Letters for their 2007 audit to ensure that they not contain any release of liability to the auditors. If an insurer finds that its engagement letter for 2007 does not meet the requirements contained in s. Ins 50.08 (1) (am), Wis. Adm. Code, then it shall prevail upon its independent accountant to amend its engagement letter eliminating any provision where the insurer "has either directly or indirectly entered into an agreement or indemnification with respect to the audit of the insurer." Failure to do so shall subject the audit report filed under s. Ins 50.05, Wis. Adm. Code, to be rejected by the office.
Should you have any questions concerning this bulletin, please contact any one of the individuals listed below. Thank you.
Please contact any of the following persons:
Mr. Steve Caughill at
firstname.lastname@example.org or (608) 267-2049
Mr. Steve Junior at
email@example.com or (608) 267-4388
Mr. Peter Medley at
firstname.lastname@example.org or (608) 267-5030