Notice - Guidance Notes - Role of the Approved Auditor (2013-09-25)

Summary

This is a Bermuda Monetary Authority Guidance Note explaining the role, appointment, approval and reporting duties of the approved auditor for Bermuda registered insurers and insurance groups under the Insurance Act 1978. It consolidates and replaces two 2005 guidance notes to reflect legislative changes requiring auditors to report matters of material significance to the Authority and requiring designated insurers to ensure group-level approved auditors are appointed.

• Appointment: Every insurer must appoint an Authority-approved auditor to audit its statutory financial statements; a designated insurer must ensure its group appoints an approved auditor for group financial statements.
• Notification and approval process: Insurers must notify the Authority in writing of a proposed approved auditor before registration, notify within 14 days of any change to that information, and obtain prior Authority approval before appointing a new approved auditor following a change.
• Criteria for approval: The Authority assesses proposed auditors for fitness and propriety and independence from the insurer or group before approving them.
• Disqualification and replacement: If an approved auditor ceases to be independent or fit and proper, the insurer or designated insurer must take timely steps to appoint a replacement; written notice to the Authority is required for removals, replacements, resignations or non-reappointment.
• Audit and reporting requirements: Insurers must prepare audited statutory financial statements each year (unless exempted) and file a statutory financial return with an approved auditor's report in the prescribed form at the same time.
• Communication with the Authority: Approved auditors must give prompt written notice to the Authority of material qualifications or adverse opinions on financial statements, and of any fact or matter likely to be materially significant to the Authority's functions, such as fraud, going concern doubts, material misstatements or internal control weaknesses.
• Access and cooperation: Insurers and designated insurers must ensure the approved auditor has access to records, personnel and outsourced service providers' data, and auditors are expected to cooperate with Authority inspections, including providing access to working papers.

The revised Guidance Note was open for industry comment until 25 October 2013 and was stated to become effective from 31 December 2014.

Key obligations

• Every insurer must appoint an auditor approved by the Authority to audit its statutory financial statements (section 16(1))
• A designated insurer must ensure its group appoints an approved auditor to audit the group's GAAP or IFRS financial statements (section 16(1A))
• An insurer must notify the Authority in writing of its proposed approved auditor prior to registration
• An insurer must give written notice to the Authority within 14 days of any change in the previously notified proposed auditor information
• An insurer or designated insurer must obtain the Authority's prior approval before appointing a new approved auditor following a change
• An insurer or designated insurer must give written notice to the Authority before removing an approved auditor before expiration of term, or replacing one at expiration of term
• An approved auditor must give written notice to the Authority if resigning before term expiration, becoming aware he will be replaced, or not seeking reappointment
• If an insurer or designated insurer becomes aware its approved auditor is no longer independent or fit and proper, it must take timely steps to appoint a replacement
• An insurer must prepare statutory financial statements audited by the approved auditor for each financial year unless exempted by the Authority
• An insurer must file a statutory financial return, including the approved auditor's report in the prescribed form, at the time it files its statutory financial statements
• An approved auditor must give written notice to the Authority and provide a copy of the report as soon as possible upon making a material modification, qualification, denial of opinion or adverse opinion
• An approved auditor must give written notice to the Authority upon becoming aware of any fact or matter likely to be of material significance to the Authority's functions, including fraud, going concern doubts, material misstatements, internal control weaknesses or unresolved disagreements with management
• Insurers and designated insurers must ensure the approved auditor has access to all relevant data, records and personnel, including from material outsourcing suppliers
• Approved auditors are expected to cooperate with the Authority's inspection process by providing access to working papers upon request

Applies to

registered insurers, insurance groups, designated insurers, approved auditors

Deadlines

• 25th October 2013: Deadline for industry stakeholders and interested parties to submit comments on the revised Guidance Note to policy@bma.bm
• 31st December 2014: Date the revised Guidance Notes become effective
• 14 days: Insurer must give written notice to the Authority of any change in the proposed auditor information previously notified
• 14 days: If an insurer fails to appoint or fill a vacancy for an approved auditor, the Authority may appoint one and fix remuneration within this period if not previously agreed