What Is The Purpose Of Financial Reporting For Insurers?
Privately-held insurers who meet a certain threshold of revenue are required to submit financial reports to their state’s insurance department. These reports provide details about the internal controls used by management for their statutory financial statements when undergoing an annual audit. Management should be able to provide an assessment of their internal controls and the effectiveness of these controls to ensure accurate financial reporting about the company’s recent fiscal year. To comply with financial reporting rules, insurers adopt the requirements stated in the Annual Financial Reporting Model Regulation, also known as the Model Audit Rule (MAR).
What Is The Model Audit Rule?
The Model Audit Rule is a set of requirements used by independent auditors such as I.S. Partners, LLC to provide audit services for insurers regarding their internal controls for financial reporting. The requirements use several of the components of the Sarbanes-Oxley Act, Section 404: Management of Assessment of Internal Controls to provide an attestation report regarding management’s assertion over the effectiveness of internal controls and any issues that are disclosed about the internal controls. These standards provide the guidance which I.S. Partners, LLC follows when providing attestation reports for insurers and assisting management in asserting that appropriate controls were established and tested.
What Is SOX Compliance?
Since it’s initial passage in 2002, the Sarbanes-Oxley Act has become an integral reporting system for publicly traded companies. The primary goals of SOX include:
- Increasing the transparency of corporate government and financial reporting
- Create a formal system of internal checks and balances
- “To protect investors by improving the accuracy and reliability of corporate disclosures”
Who Does SOX Apply To?
- Public companies or companies that hope to become public
- International companies that have registered equity or debt securities with the SEC
- Accounting firms or third parties that offer financial services to any of the above company types
Taking Steps To Become SOX Compliant
Rather than give you a list of steps to take, we want to leave you with this some advice. SOX compliance should be thought of as more than an audit you need to pass. Through best practices, SOX compliance will inevitably create greater value in your organization and can have several tangible benefits for you business.
The Basics Of SOX Audit
SOX audits should take place once a year by an independent auditor. Be sure that your SOX audit remains separate from internal audits being completed to avoid any conflicts of interest. Pro tip: think ahead and plan the audit so that you can include the results in your annual report for stockholders to view.
You should plan to meet with your auditing firm beforehand to discuss timing, what will be covered, and what results you may expect to see. Please note, that staff interviews may be necessary during the SOX audit process.
How We Can Help
I.S. Partners, LLC specializes in performing internal audit preparedness engagements for insurance companies throughout the United States, and our staff of audit professionals possesses a high degree of expertise in the areas of Sarbanes-Oxley compliance, insurance regulatory compliance, risk assessments, process documentation, control testing and validation, and the creation of effective self-assessment programs. Our comprehensive audit services ensure that controls are in place and operating effectively to meet the company’s obligations.