Virginia Administrative Code › Title 14 - INSURANCE › Agency 5 - STATE CORPORATION COMMISSION, BUREAU OF INSURANCE › Chapter 270 - RULES GOVERNING ANNUAL FINANCIAL REPORTING › Section 14VAC5-270-144 - Requirements for Audit Committees

Current through Register Vol. 40, No. 24, July 15, 2024
A. This section shall not apply to foreign or
				alien insurers licensed in Virginia 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. 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 14VAC5-270-145.
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 of this section.
E. In order to be considered independent for
				purposes of this section, a member of the Audit Committee may not, other than
				in the 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
				subsidiary thereof. However, if Virginia 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.
F. If a
				member of the Audit Committee ceases to be independent for reasons outside the
				member's reasonable control, that member, with notice by the responsible entity
				to the commission, 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.
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 commission 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 commission by the insurer, which shall include a description of
				the basis for the change. The election shall remain in effect for perpetuity,
				unless rescinded.
H. The Audit
				Committee shall require the accountant that conducts for an insurer any audit
				required by this chapter to timely report to the Audit Committee in accordance
				with the requirements of AU-C Section 260 of the AICPA Professional Standards,
				The Auditor's Communication with those Charged with Governance, 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.
If an insurer is a member of an insurance holding company
				  system, the reports required by this subsection may be provided to the Audit
				  Committee on an aggregate basis for insurers in the holding company system,
				  provided that any substantial differences among insurers in the system are
				  identified to the Audit Committee.