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What Are My Auditors Doing?

Agenda 

  • The Audit Environment Today
  • The Audit Process and Audit Efficiency
  • Management Oversight
  • Year-round Relationships
  • Value-Added Service

The Audit Environment Today

Today’s Audit Environment 

  • Political Environment
    • 37 Governors’ races
    • Insurance Industry “bad” reputation
     
  • Healthcare Reform
    • MLR’s
     
  • Dodd-Frank
    • Financial Stability Oversight Council
    • Federal Insurance Office (FIO)
      • Missouri commissioner – John Huff
       
     
  • Regulatory Changes
    • RBC
    • SSAP 10R
    • Solvency II
      • Capital Requirements
      • Governance, Risk Management and Supervision
      • Disclosure and Transparency
       
     
  • Company Failures/Liquidations
  • FASB & SAS
    • Codification
    • Record number of new pronouncements
     
  • IFRS Conversion
    • Fair Market Value
    • Principles vs. Rules Based
     
  • SSAP Impact?
  • Other Factors
    • PCAOB
    • Peer Review
    • State Examinations
    • Audit Risk Alerts
     
  • Changes in the Audit Environment require the auditor to change how they audit
    • Evaluate the environment
    • Evaluate the impact on audit client
    • Evaluate the clients’ assessment of risk and actions taken to remediate/mitigate
    • Design audit tests
     

The Audit Process and Audit Efficiency

Audit Requirements: 

  • Audit Risk
    • Environmental Risk
    • Directional Risk
    • 8- Hour Risk
    • "What keeps you up at night?"
    • Historical Issues
     
  • Fraud Risk
    • Who’s responsibility is it?
     
  • Reputational Risk
  • Regulator Risk
  • Design Procedures to Respond to Risk
  • Audit Approach
    • Balance Sheet Approach?
    • Leverage Existing Controls
      • Documented vs.
      • Undocumented
       
    • Materiality Concepts
    • Risk-Linked Procedures
    • Regulation Impact Considerations (Market Conduct)
    • Actuarial Reviews
     
  • Audit Reporting
    • Financial Statements
    • Report to Audit Committee (SAS 61)
    • Independence
    • Qualifications
    • Internal Controls (115)
    • Awareness Letters
    • Audit Adjustments
     

Audit Efficiency 

  • Know your auditor’s audit approach and be ready
  • Understand the risks facing your company and have a plan
  • Avoid the “dump and run”
  • Planning meetings
  • Schedule regular status meetings
  • Prepare financial statements
  • Computer Assisted Audit
  • Ask for budget information
  • Using a “Schedule of Schedules”
    • Target Dates
    • Responsible Persons
    • Processes and Controls Documentation
    • FTP Sites
     
  • Auditor Focused Schedules
  • Analytics
  • MD&A
  • Staff Availability
  • On-site Technical Reviews

Management Oversight

  • The role of management and owners
    • Depth of understanding of business
    • Control environment
    • “Tone at the Top”
     
  • The role of financial managers
    • More than just financial planning
     
  • Board of Directors
    • Understanding of financial statements
    • Understanding of Insurance Environment
     
  • Audit Committees
    • Audit committee charter
    • Financial Statement Oversight
    • Statutory accounting concepts
     
  • IT IS IMPORTANT TO MANAGE EXPECTATIONS
  • Model Audit Rule Considerations
    • Audit Partner Rotation Requirements
    • Audit Committee Independence Rules
    • Internal Control Assessment
     

Year-Round Relationships with your Audit Team

  • Include your auditors on distribution lists
    • Regulatory filings
    • Board packages
     
  • Ask your auditors’ advice before making critical decisions
  • Keep auditors informed regarding business changes
  • Schedule interim meetings
  • Have a closing meeting, ask the “how am I doing questions”

Value-Added Services

  • Leverage your relationship with your auditor
    • Ask for auditor advice (Are they industry experts?)
    • Ask for input
    • Continuing communication
    • Tax planning
     
  • Make management recommendation letters a positive rather than a negative
  • Keeping informed regarding industry trends and technical pronouncements
  • Training
  • IT reviews
  • State Examinations
    • Risk-focused exam approach relies heavily on Auditor Workpapers
    • Encourage a meeting
    • Make sure audit team fully cooperates with exam team
    • Examinations now require prospective risk analysis
     

Contact: Dianne Batistoni

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