Hawaii Administrative Rules › Title 16 - DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS › Chapter 185 - ANNUAL AUDITED FINANCIAL REPORTING › Section 16-185-113 - Requirements for audit committees

Current through June, 2024
(a) 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.
(b) 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 chapter.
			 Each accountant shall report directly to the audit committee.
(c) Beginning January 1, 2020, 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
			 their responsibilities if required by section 16-185-113.1, Hawaii
			 Administrative Rules.
(d) 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 subsection (g).
(e) 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 thereof. However, if law
			 requires board participation by otherwise non-independent members, that law
			 shall prevail and such members may participate in the audit committee and be
			 designated as independent for audit committee purposes, unless they are an
			 officer or employee of the insurer or one of its affiliates.
(f) 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 commissioner, 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. In determining
			 independence, the commissioner shall consider utilizing guidance provided in
			 the Securities and Exchange Commission's Final Rule No. 33-8220, Standards
			 Relating to Listed Company Audit Committees adopted April 9, 2003, as amended
			 or replaced.
(g) To exercise the
			 election of the controlling person to designate the audit committee for
			 purposes of this chapter, the ultimate controlling person shall provide written
			 notice to the 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 commissioner by the insurer, which shall include a description of
			 the basis for the change. The election shall remain in effect for perpetuity,
			 until rescinded.
(h)
(1) The audit committee shall require the
			 accountant, who performs for an insurer any audit required by this chapter, to
			 timely report to the audit committee in accordance with the requirements of
			 Statement on Auditing Standards 114, The Auditor's Communication with those
			 charged with Governance, as amended or replaced, 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.