§16-185-102 - Definitions.

§16-185-102 Definitions. As used in this chapter:

         "Accountant" or "independent certified public accountant" means a person or accounting firm licensed in good standing with the American Institute of Certified Public Accountants and in all states in which the accountant or independent certified public accountant is licensed to practice. For Canadian and British companies, these terms mean a Canadian-chartered or British-chartered accountant.

         An "affiliate" of, or person "affiliated" with a specific person, is one who directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with the person specified.

         "Audit committee" means a body established by the board of directors of an entity for the purpose of overseeing the accounting and financial reporting processes of an insurer or group of insurers, the internal audit function of an insurer or group of insurers, if applicable, and external audits of financial statements of the insurer or group of insurers. The audit committee of any entity that controls an insurer or a group of insurers may be deemed to be the audit committee for one or more of these controlled insurers solely for the purposes of this chapter at the election of the controlling person as discussed in sections 16-185-103(d) and 16-185-113(g), Hawaii Administrative Rules. If an audit committee is not designated by the insurer, the insurer's entire board of directors shall constitute the audit committee.

         "Audited financial report" means and includes those items specified in section 16-185-104, Hawaii Administrative Rules.

         "Commissioner" or "insurance commissioner" means the Hawai"i insurance commissioner, unless otherwise specified.

         "Division" or "insurance division" means the Hawai"i insurance division.

         "Group of insurers" means those licensed insurers included in the reporting requirements of Hawai"i Revised Statutes ("HRS"), chapter 431, article 11, or a set of insurers as identified by management, for the purpose of assessing the effectiveness of internal control over financial reporting.

         "Indemnification" means an agreement of indemnity or a release from liability where the intent or effect is to shift or limit in any manner the potential liability of the person or firm for failure to adhere to applicable auditing or professional standards, whether or not resulting in part from knowing of other misrepresentations made by the insurer or its representatives.

         "Insurer" means a licensed entity as defined in section 431:1-202, HRS, and a risk retention captive insurance company as defined in section 431:19-101, HRS.

         "Internal audit function" means a person or persons that provide independent, objective, and reasonable assurance designed to add value and improvement to an organization's operations and accomplish its objectives by bringing a systematic and disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

         "Internal control over financial reporting" means a process effected by an entity's board of directors, management, or other personnel designed to provide reasonable assurance regarding the reliability of the financial statements, i.e., those items specified in section 16-185-104(2) through (7), Hawaii Administrative Rules, and includes those policies and procedures that:

         (1) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets;

         (2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements, i.e., those items specified in section 16-185-104(2) through (7), Hawaii Administrative Rules, and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and

         (3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could have a material effect on the financial statements, i.e., those items specified in section 16-185-104(2) through (7), Hawaii Administrative Rules.

         "Material weakness" has the same meaning as defined by the Statement on Auditing Standard 115, Communication of Internal Control Related Matters Identified in an Audit, as amended or replaced.

         "Section 404" means section 404 of the Sarbanes-Oxley Act of 2002 and the United States Securities and Exchange Commission's rules and regulations promulgated thereunder.

         "Section 404 report" means management's report on "internal control over financial reporting" as defined by the United States Securities and Exchange Commission and the related attestation report of the independent certified public accountant.

         "SOX compliant entity" means an entity that either is required to be compliant with or voluntarily is compliant with all of the following provisions of the Sarbanes-Oxley Act of 2002:

         (1) The preapproval requirements of section 201 (section 10A(i) of the Securities Exchange Act of 1934);

         (2) The audit committee independence requirements of section 301 (section 10A(m)(3) of the Securities Exchange Act of 1934); and

         (3) The internal control over financial reporting requirements of section 404 (item 308 of United States Securities and Exchange Commission Regulation S-K).

        [Eff 2/04/10; am and comp 12/30/19] (Auth: HRS §431:2-201) (Imp: HRS §§431:2-201, 431:3-302.5)

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