NU Online News Service, June 15, 2:27 p.m. EDT
MINNEAPOLIS–A sentence in the implementation guide of the National Association of Insurance Commissioners' (NAIC) proposed Model Audit Rule has been altered to clear up responsibility for auditing insurance company subsidiaries.
Industry representatives defined as interested parties wrote a letter to the NAIC/American Institute of Certified Public Accountants (AICPA) Working Group noting the implementation guide contained language that conflicted with the Model Audit Rule.
The Model Audit Rule is designed to be a model regulation requiring annual audited financial reports for all companies complying with the Public Company Accounting Reform and Investor Protection (Sarbanes-Oxley) Act.
The implementation guide was created to help answer questions and clarify the Model Audit Rule, according to David Smith, chief financial examiner for the Virginia Insurance Department.
However, at the NAIC Summer Meeting held here, Keith Bell, senior vice president, accounting policy, corporate finance for The Travelers Companies, Inc., said a sentence in the implementation guide indicates that subsidiaries of SOX-compliant insurers must have their own independent audit committees, in addition to the audit committees for the parent company.
Mr. Bell said this conflicts with language in the Model Audit Rule, and would also be redundant, as the SOX-compliant parent is responsible for the oversight of its subsidiaries.
The working group agreed, struck the sentence in question and altered some other language to bring the guide in line with the Model Audit Rule.
The Model Audit Rule is scheduled to become effective in 2010.
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