2023 Indiana Code › Title 27. Insurance › Article 1. Department of Insurance › Chapter 3.5. Annual Audited Financial Reports › 27-1-3.5-9. Qualifications of Independent Auditor

Sec. 9. (a) For the purposes of this chapter, the commissioner may not recognize as an independent auditor any individual or firm that is not:
(1) a certified public accountant (if an individual) or made up of certified public accountants (if a firm); or
(2) in good standing with:
(A) the American Institute of Certified Public Accountants; and
(B) all of the authorities that license certified public accountants and certified public accounting firms in the states in which the individual or firm is licensed to practice.
(b) A partner or other individual responsible for rendering a report may not act in that capacity for more than five (5) consecutive years. An individual who has been responsible for rendering a report for five (5) years is disqualified from acting in that or a similar capacity for the same company or its insurance subsidiaries or affiliates for five (5) years. A domestic insurer may apply to the commissioner and request to be exempted from the five (5) year rotation requirement on the basis of unusual circumstances. The commissioner may consider the following factors in determining if relief should be granted:
(1) The number of partners, expertise of the partners, or number of insurance clients in the currently registered firm.
(2) The premium volume of the domestic insurer.
(3) The number of jurisdictions in which the domestic insurer transacts business.
(c) The commissioner may not recognize as an independent auditor or accept an annual audited financial report prepared in whole or part by a person who:
(1) has been convicted of fraud, bribery, a violation of the Racketeer Influenced and Corrupt Organizations Act under federal law (18 U.S.C. 1961 through 1968) or state law (IC 35-45-6) or any dishonest conduct or practices under federal or state law;
(2) has been found to have violated the insurance law of this state with respect to any previous reports submitted under this chapter; or
(3) has demonstrated a pattern or practice of failing to detect or disclose material information in previous reports filed under this chapter.
(d) The commissioner shall not recognize as a qualified independent certified public accountant, or accept an annual audited financial report prepared in whole or in part by an accountant that provides to a domestic insurer, contemporaneously with the audit, any of the following nonaudit services:
(1) Bookkeeping or other services related to the accounting records or financial statements of the domestic insurer.
(2) Financial information systems design or implementation.
(3) Appraisal or valuation services, fairness opinions, or contribution-in-kind reports.
(4) Actuarially oriented advisory services involving the determination of amounts recorded in the financial statements. This does not include the following:
(A) The accountant assisting the domestic insurer to understand the methods, assumptions, and inputs used in the determination of amounts recorded in the financial statement if it is reasonable to conclude that the assistance provided is not subject to audit procedures during an audit of the domestic insurer's financial statements.
(B) An accountant's actuary issuing an actuarial opinion or certification concerning the domestic insurer's reserves if the following apply:
(i) The accountant and the accountant's actuary have not performed any management functions or made any management decisions.
(ii) The domestic insurer has competent personnel, or engages a third party actuary, to estimate the reserves for which management takes responsibility.
(iii) The accountant's actuary tests the reasonableness of the reserves after the domestic insurer's management has determined the amount of the reserves.
(5) Internal audit outsourcing services.
(6) Management or human resources functions.
(7) Broker, dealer, investment adviser, or investment banking services.
(8) Legal services or expert services unrelated to the audit.
(9) Any other services that the commissioner determines to be impermissible in rules adopted under IC 4-22-2.
(e) In making a determination under subsection (d), the commissioner shall generally consider whether the accountant's independence has been impaired by any of the following, in which case the commissioner shall not recognize the accountant or accept the annual audited financial report from the accountant:
(1) Functioning in the role of management for the domestic insurer.
(2) Auditing the accountant's own work.
(3) Serving as an advocate for the domestic insurer.
(f) The commissioner may conduct a hearing under IC 4-21.5 to determine whether an independent auditor engaged by a domestic insurer is sufficiently independent of that domestic insurer to be capable of exercising independent judgment and expressing an objective opinion on the financial statements in the annual financial report filed by the insurer under this chapter. If the commissioner determines that the auditor is not sufficiently independent of the insurer, the commissioner shall require the insurer to replace the auditor with another that is sufficiently independent of the insurer.
As added by P.L.244-1989, SEC.2. Amended by P.L.251-1995, SEC.9; P.L.11-2011, SEC.6; P.L.146-2015, SEC.14.