Illinois Administrative Code › Title 50 - INSURANCE › Part 925 - ANNUAL FINANCIAL REPORTING › Section 925.140 - Requirements for Audit Committees

Current through Register Vol. 48, No. 28, July 12, 2024
This Section shall not apply to foreign or alien insurers
				licensed in this State or an insurer that is a SOX Compliant Entity or a direct
				or indirect wholly-owned subsidiary of a SOX Compliant Entity.
a) The audit committee shall be directly
			 responsible for the appointment, compensation and oversight of the work of any
			 accountant (including resolution of disagreements between management and the
			 accountant regarding financial reporting) for the purpose of preparing or
			 issuing the audited financial report or related work pursuant to this Part.
			 Each accountant shall report directly to the audit committee.
b) The audit committee of an insurer or group
			 of insurers shall be responsible for overseeing the insurer's internal audit
			 function and granting the person or persons performing the function suitable
			 authority and resources to fulfill the responsibilities, if required by Section
			 925.141.
c) Each member of the
			 audit committee shall be a member of the board of directors of the insurer or a
			 member of the board of directors of an entity elected pursuant to both
			 subsection (f) and the definition of audit committee found in Section
			 925.30.
d) In order to be considered independent for
			 purposes of this Section, a member of the audit committee may not, other than
			 in his or her capacity as a member of the audit committee, the board of
			 directors, or any other board committee, accept any consulting, advisory or
			 other compensatory fee from the entity or be an affiliated person of the entity
			 or any subsidiary of the entity. However, if law requires board participation
			 by otherwise non-independent members, that law shall prevail and the members
			 may participate in the audit committee and be designated as independent for
			 audit committee purposes, unless they are officers or employees of the insurer
			 or one of its affiliates.
e) If a
			 member of the audit committee ceases to be independent for reasons outside the
			 member's reasonable control, that person, with notice by the responsible entity
			 to the State, may remain an audit committee member of the responsible entity
			 until the earlier of the next annual meeting of the responsible entity or one
			 year from the occurrence of the event that caused the member to be no longer
			 independent.
f) To exercise the
			 election of the controlling person to designate the audit committee for
			 purposes of this Part, the ultimate controlling person shall provide written
			 notice to the domiciliary commissioners of the affected insurers. Notification
			 shall be made timely prior to the issuance of the statutory audit report and
			 include a description of the basis for the election. The election can be
			 changed through notice to the domiciliary commissioner of the affected insurer,
			 which shall include a description of the basis for the change. The election
			 shall remain in effect for perpetuity, until rescinded.
g) Report to Audit Committee
1) The audit committee shall require the
			 accountant that performs for an insurer any audit required by this Part to
			 timely report to the audit committee in accordance with the requirements of
			 AU-C Section 260, The Auditor's Communication With Those Charged With
			 Governance, AICPA Professional Standards (as of December 15, 2014 (no later
			 amendments or editions), by American Institute of Certified Public Accountants,
			 Inc., 1211 Avenue of the Americas, New York NY 10036-8775; website
www.aicpa.org
), including:
A) All significant accounting policies and
			 material permitted practices;
B)
			 All material alternative treatments of financial information within statutory
			 accounting principles that have been discussed with management officials of the
			 insurer, ramifications of the use of the alternative disclosures and
			 treatments, and the treatment preferred by the accountant; and
C) Other material written communications
			 between the accountant and the management of the insurer, such as any
			 management letter or schedule of unadjusted differences.