31 Pa. Code § 147.6 - Recognition, qualification and responsibilities of an independent certified public accountant
(a) An
annual audited financial report must be prepared by a qualified independent
certified public accountant recognized by the Commissioner.
(b) Except for insurers organized in Canada
or the United Kingdom of Great Britain and Northern Ireland, the Commissioner
will not recognize a person or firm as a qualified independent certified public
accountant nor accept an annual audited financial report prepared in whole or
in part by the person or firm under any of the following conditions:
(1) The person is not licensed, or the firm
is not registered, to practice and is not in good standing under the laws of
the Commonwealth or of a state with licensing requirements similar to the
Commonwealth.
(2) The person or
firm is not in good standing with the American Institute of Certified Public
Accountants, Inc. and, if applicable, the Public Company Accounting Oversight
Board.
(3) The person or firm is
not in good standing in all states in which the person is licensed, or the firm
is registered, to practice.
(4) The
person or firm has entered into an agreement of indemnity, or other release
from liability, that would shift, transfer, or limit in any manner the
potential liability of the person or firm for failure, whether by omission or
commission, to adhere to applicable auditing or professional standards, whether
or not the failure would result in whole or in part from misrepresentations
made by the insurer or its representatives.
(5) The person or firm employed a partner or
senior manager who was involved in an audit of the insurer during the 1 year
period preceding the date that the most current annual audited financial report
is due and who currently serves as a member of the board of directors,
president, chief executive officer, controller, chief financial officer, chief
accounting officer, or in any equivalent position for the insurer.
(6) The person or firm provides to the
insurer contemporaneously with the audit any of the following non-audit
services:
(i) Bookkeeping or other services
relating to the insurer's accounting records or financial statements.
(ii) Financial information systems design and
implementation.
(iii) Appraisal or
valuation services, fairness opinions or contribution-in-kind
reports.
(iv) Actuarial advisory
services.
(v) Internal audit
outsourcing services.
(vi)
Management functions or human resource services.
(vii) Broker or dealer, investment adviser or
investment banking services.
(viii)
Legal or expert services unrelated to the audit.
(c) For an insurer organized in Canada or the
United Kingdom of Great Britain and Northern Ireland, the Commissioner will not
recognize a person or firm as a qualified independent public accountant nor
accept an annual audited financial report prepared in whole or in part by the
person or firm under any of the following conditions:
(1) The person or firm is not a chartered
accountant.
(2) The person or firm
has entered into an agreement of indemnity, or other release from liability,
that would shift, transfer, or limit in any manner the potential liability of
the person or firm for failure, whether by omission or commission, to adhere to
applicable auditing or professional standards, whether or not the failure would
result in whole or in part from misrepresentations made by the insurer or its
representatives.
(3) The person or
firm meets the criteria of subsection (b)(5) or provides to the insurer
contemporaneously with the audit any of the nonaudit services prohibited under
subsection (b)(6) and the insurer has not been granted an exemption under
subsection (h).
(d) The
qualified independent certified public accountant's lead partner or other
person primarily responsible for an insurer's audit may not act in that
capacity for more than 5 consecutive years. Following a 5-year period of
service, the person will be disqualified from acting in that or a similar
capacity for the same insurer or its insurance subsidiaries or affiliates for 5
consecutive years.
(e) A qualified
independent certified public accountant who performs an audit for an insurer
may only engage in nonaudit services, including tax services, for the insurer
if all of the following requirements are met:
(1) The services are not prohibited under
subsection (b)(6).
(2) The
independent certified public accountant does not function in the role of
management, audit his own work or serve in an advocacy role for the
insurer.
(3) The services have been
approved in advance by the insurer's audit committee under subsection
(f).
(f) Auditing and
nonaudit services provided to an insurer by the insurer's qualified independent
certified public accountant shall be preapproved in writing by the insurer's
audit committee, except that preapproval of nonaudit services is not required
if any of the following criteria are met:
(1)
The insurer is a Sarbanes-Oxley compliant entity.
(2) The insurer is a direct or indirect
wholly-owned subsidiary of a Sarbanes-Oxley compliant entity.
(3) During the fiscal year in which
nonaudited services are provided, the aggregate amount of the nonaudit services
constitute 5% or less of the total amount of fees paid or owed by the insurer
to the qualified independent certified public accountant.
(g) An insurer's audit committee may delegate
the authority to grant the preapprovals required under subsection (f) to one or
more designated members of the audit committee. A decision of any member to
whom this authority is delegated shall be presented to the full audit committee
at the next scheduled meeting.
(h)
The following provisions apply to applications for relief and exemptions.
(1) An insurer may apply to the Commissioner
for relief from subsection (b)(5) or subsection (d), or both, on the basis of
unusual circumstances. In determining whether relief should be granted, the
Commissioner may consider the following factors:
(i) The number of partners, the expertise of
the partners or the number of insurance or continuing care provider clients in
the currently registered firm.
(ii)
The premium volume of the insurer or revenue volume of the continuing care
provider.
(iii) The number of
jurisdictions in which the insurer transacts business.
(2) If relief is granted, the insurer shall
include a copy of the granted relief with its audited financial report filed
under §
147.3(a)
(relating to filing and extensions for filing required reports and
communications).
(3) An insurer
with direct written and assumed premium less than $100,000,000 in a calendar
year may apply for exemption from subsection (b)(6) on the basis of financial
or organizational hardship under §
147.13(g)
(relating to effective date and exemption).
(4) The requirements of subsection (b)(5) and
(6) and subsections (e), (f) and (g) do not apply to continuing care
providers.
(i) The
Commissioner will not recognize as a qualified independent certified public
accountant, nor accept an annual audited financial report prepared in whole or
in part by a natural person who meets one of the following conditions:
(1) The person has been convicted of fraud,
bribery, a violation of 18 U.S.C.A. Chapter 96 (relating to the Racketeer
Influenced and Corrupt Organizations) or any dishonest conduct or practice
under Federal or state law.
(2) The
person has been found to have violated the insurance laws of the Commonwealth
with respect to previous reports submitted under this chapter.
(3) The person has demonstrated a pattern or
practice of failing to detect or disclose material information in previous
reports filed under this chapter.
(j) The Commissioner may hold a hearing in
accordance with
2
Pa.C.S. §§
501-508 and
701-704 (relating to
Administrative Agency Law) and Chapters 56 and 57 (relating to special rules of
administrative practice and procedure; and publication of citations and notice
of hearings) to determine whether a certified public accountant is qualified
and, considering the evidence presented, may rule that the accountant is not
independent or qualified, or both, for purposes of expressing an opinion on the
financial statements in the audited financial report made under this chapter
and may require the insurer to replace the certified public
accountant.
(k) A qualified
independent certified public accountant may enter into an agreement with an
insurer to have disputes relating to an audit resolved by mediation or
arbitration. However, in the event of a receivership proceeding commenced
against the insurer under Article V of The Insurance Department Act
(40
P.S. §§
221.1-221.63), the mediation or
arbitration agreement may be disavowed by the statutory receiver.
(l) If the Commissioner has reason to believe
that an audit performed contains a material departure from generally accepted
auditing standards, the Commissioner may refer the matter to the State Board of
Accountancy and the American Institute of Certified Public Accountants, Inc.,
for review and determination. Upon the finding by the State Board of
Accountancy or the American Institute of Certified Public Accountants, Inc.,
that a certified public accountant violated applicable standards relating to
competence, the performance of audits, accounting principles or other
professional conduct, the Commissioner will not accept the audited financial
report for that audit and will no longer accept audited financial statements
certified by that certified public accountant.
(m) Within 60 days of receipt of notice from
the Commissioner of a finding under subsection (l) that an audit contains a
material departure from generally accepted auditing standards, the insurer for
which the audit was performed shall register with the Commissioner the name and
address of a qualified independent certified public accountant retained by the
insurer to perform an audit in compliance with this chapter for the year for
which the finding was made. The audited financial report for the year for which
the finding was made shall be filed within a time period to be determined by
the Commissioner.
Notes
The provisions of this § 147.6 amended under the authority of sections 206, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P.S. §§ 66, 186, 411 and 412); sections 320, 630, 1007 and 2452 of The Insurance Company Law of 1921 (40 P.S. §§ 443, 764a, 967 and 991.2452); sections 205 and 206 of The Pennsylvania Fair Plan Act (40 P.S. §§ 1600.205 and 1600.206); section 731 of the Medical Care Availability and Reduction of Error (MCARE) Act (40 P.S. § 1303.731); 40 Pa.C.S. §§ 6125, 6331 and 6701; sections 11 and 14 of the Health Maintenance Organization Act (40 P.S. §§ 1561 and 1564); and sections 7 and 25 of the Continuing-Care Provider Registration and Disclosure Act (40 P.S. §§ 3207 and 3225).
State regulations are updated quarterly; we currently have two versions available. Below is a comparison between our most recent version and the prior quarterly release. More comparison features will be added as we have more versions to compare.
No prior version found.