Washington Administrative Code › Title 284 - Insurance Commissioner, Office of the › Chapter 284-07 - Requirements as to company reports and annual statements › AUDITED FINANCIAL STATEMENTS › Section 284-07-213 - Requirements for audit committees

Current through Register Vol. 24-14, July 15, 2024
This section does 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 is 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 WAC
				284-07-100
				through
				284-07-230.
				Each accountant must 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 WAC
				284-07-214.
(3) Each member of the
				audit committee must 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 WAC
				284-07-110(3).
(4) 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 nonindependent 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 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 for 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 WAC
				284-07-100
				through
				284-07-230,
				the ultimate controlling person must provide written notice to the
				commissioners of the affected insurers. Notification must 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 must include a description of the basis for
				the change. The election remains in effect for perpetuity, until
				rescinded.
(7)
(a) The audit committee must require the
				accountant that performs for an insurer any audit required by WAC
				284-07-100
				through
				284-07-230
				to timely report to the audit committee in accordance with the requirements of
				SAS 61,
Communication with Audit Committees
, or its
				replacement, including:
(i) All significant
				accounting policies and material permitted practices;
(ii) 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
(iii) Other
				material written communications between the accountant and the management of
				the insurer, such as any management letter or schedule of unadjusted
				differences.