18 Del. Admin. Code § 302-3.0

Current through Register Vol. 28, No. 5, November 1, 2024

Section 302-3.0 - Annual Audit

3.1 Each company shall have an annual audit by an Independent Certified Public Accounting Firm and shall file the annual audit with the Commissioner on or before June 30 for the year ending December 31 immediately preceding.

3.1.1 A company that elects to file its annual report on a fiscal year basis pursuant to 18 Del.C. § 6907(c), shall submit its annual audit report to the Commissioner no later than 180 days following the close of its fiscal year.

3.1.2 A company shall not file an annual audit in which a partner or other person responsible for rendering such annual audit has acted in that capacity for more than seven (7) consecutive years. Each company filing an annual audit shall disqualify such person from acting in that or a similar capacity for the same company or its insurance subsidiaries or affiliates for a period of two (2) years. A company may make application to the Commissioner for relief from the above rotation requirement on the basis of unusual circumstances. The Commissioner may consider the following factors in determining if the relief should be granted:

3.1.2.1 Number of partners, expertise of the partners or the number of insurance clients in the company's current independent certified public accounting firm.

3.1.2.2 Premium volume of the company; or

3.1.2.3 Any other factor.

3.2 The annual audit shall consist of the following:

3.2.1 Report of independent certified public accounting firm.

3.2.2 Balance sheet reporting assets (including, as applicable, admitted assets), liabilities, capital and surplus.

3.2.3 Statement of operations.

3.2.4 Statement of cash flows.

3.2.5 Statement of changes in capital and surplus.

3.2.6 Notes to financial statements. These notes shall be those required under generally accepted accounting principles, statutory accounting principles or international financial reporting standards, as applicable, and shall include:

3.2.6.1 A reconciliation of differences, if any, between the audited financial statements and the annual report required hereunder with a written description of the nature of these differences.

3.2.6.2 A summary of ownership and relationships of the company and all affiliated companies.

3.2.7 The financial statements included in the annual audit shall be prepared in a form and using language and groupings substantially the same as the relevant sections of the annual report of the company filed with the Commissioner, and the financial statement shall be comparative, presenting the amounts as of the end of the current fiscal year and the amounts as of the end of the immediately preceding fiscal year. However, in the first year in which a company is required to file an annual audit, the comparative data may be omitted.

3.3 Report on Significant Deficiencies and Material Weaknesses in Internal Controls

3.3.1 In addition to the annual audit, each company shall furnish the Commissioner with a written report, prepared in accordance with SAS No. 112, or any successor thereto, by the independent certified public accounting firm describing significant deficiencies and material weaknesses in the company's internal control structure noted by the independent certified public accounting firm during the audit. SAS No. 112, Communication of Internal Control Related Matters Identified in an Audit (AU Section 325 of the Professional Standards of the American Institute of Certified Public Accountants), requires an independent certified public accounting firm to communicate significant deficiencies and material weaknesses noted during a financial statement audit to the appropriate parties within an entity.

3.3.2 The company is required to provide a description of remedial actions taken or proposed to correct material weaknesses and, at the Commissioner's discretion, significant deficiencies, if such actions are not described in the independent certified public accounting firm's report.

3.4 Accountant's Letter

3.4.1 The independent certified public accounting firm shall furnish the company, for inclusion in the filing of the annual audit, a letter stating:

3.4.1.1 That it is independent with respect to the company and conforms to the standards of its profession as contained in the Code of Professional Ethics and pronouncements of the American Institute of Certified Public Accountants or applicable standards of the International Federation of Accountants or its member organizations.

3.4.1.2 The general background and experience of the staff engaged in the audit, and the length of time the person responsible for preparing the annual audit has served in that capacity.

3.4.1.3 That the independent certified public accounting firm understands that the audited annual report and its opinions thereon will be filed, in compliance with this regulation, with the Commissioner, and that the Commissioner will be relying on this information in the monitoring and regulation of the financial position of the company.

3.4.1.4 That the independent certified public accounting firm consents to the requirements of Section 7.0 of this regulation and that the independent certified public accounting firm consents and agrees to make available for review by the Commissioner, his designee or his appointed agent, the work papers as defined in Section 7.0.

3.4.1.5 That the partner or person in charge of the annual audit is properly licensed by an appropriate licensing authority and that he is a member in good standing in the American Institute of Certified Public Accountants or other member organization of the International Federation of Accountants.

18 Del. Admin. Code § 302-3.0