North Dakota Administrative Code › Title 45 - Insurance, Commissioner of › Article 45-03 - Regulation of Insurance Companies › Chapter 45-03-20 - Annual Financial Reporting Model Regulation › Section 45-03-20-12.1 - Requirements for audit committees

Current through Supplement No. 393, July, 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.
1. 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.
2. The audit committee of an insurer or group
				of insurers is 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
				45-03-20-15.
3. 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 6
				of this section and subsection 3 of section
				45-03-20-02.
4. In order to be considered independent for
				purposes of this section, a member of the audit committee may not, other than
				in the member's 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 nonindependent 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.
5. 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.
6. 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.
7.
a. The audit committee shall require the
				accountant that performs for an insurer any audit required by this chapter to
				timely report to the audit committee in accordance with the requirements of
				statements on auditing standards no. 61, communication with audit committees,
				or its replacement, including:
(1) All
				significant accounting policies and material permitted practices;
(2) 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
(3) Other material
				written communications between the accountant and the management of the
				insurer, such as any management letter or schedule of unadjusted
				differences.