|
Special Update - November 19, 2002
Special Update on Final Recommendations
- Independent Assessment Standards Review
Hi IMSA
Friends:
The final
recommendations that IMSA's Board of Directors approved at
their October meeting in San Diego were not available for
release when we published our October update. We promised
to pass them on to you when they arrived. They are presented
below.
You will
notice that there are significant changes from the earlier
proposals that were circulated to us for comments. This is
great evidence that IMSA is being more customer-focused than
ever, engaging the member companies and independent assessors
in real dialogue and being responsive to our comments and
views. I know some of the changes reflect our comments. I
trust many of yours were too.You will also notice that some
issues have been positioned to be reflective of further input
from member companies and independent assessors. Some of these
are the definitions of "assessment activities" and "Consulting
services," the format and content of the independent assessors'
Report to the Board and the "Agreed-Upon Procedures Report,"
the testing and sampling requirements for assessors and the
nature of IMSA's "after the fact" review of independent assessment
activities.
IMSA is
planning to convene a committee of independent assessors and
company people to refine the above issues and to create an
Independent Assessment Handbook to "provide guidance with
respect to any changes to existing independent assessors standards."
We have been invited to be on the committee and plan on doing
so. You too have an opportunity to participate and can do
so by simply emailing Don Walters at DonaldWalters@IMSAethics.org
. (One of our suggestions will be to come up with a different
name for the handbook we will be creating. The working title
of "IMSA Independent Assessment Handbook" is too close to
the title of the current "IMSA Assessment Handbook," and confusion
will result.)
The work
on completing the Committee will be done in the next few days.
The refining work will begin at once with an aggressive completion
date set for March or April so that the
final products can be published by June of 2003. IMSA plans
training sessions in 2003 to cover the new independent assessor
standards.
We think
IMSA has done a great job with this. Our hope is that these
efforts will be welcomed by regulators and seen as a strong
step toward establishing a uniform, baseline standard of practice
for all independent assessors so that they will work with
IMSA member companies and give them recognition for their
efforts to consistently meet the rigorous IMSA standards.
Here's
our copy of the IMSA release:
November
5, 2002
IMSA
Independent Assessment Standards Review Final Recommendations*
SUMMARY
1. All individuals performing independent assessment activities
for a prospective or current IMSA member company effective
April 1, 2003 must be an IMSA-approved independent
assessor. All independent assessors will be required to pay
a $1000 annual fee to retain their independent assessor status
and must agree to attend any continuing education programs
offered by IMSA. IMSA will establish a committee of independent
assessors to review current independent assessor qualification
standards and further clarify the types of activities that
will require an individual to attain independent assessor
status.
2. Independent
assessors will be encouraged to provide best practices information
to member companies. Member companies will not be required
to implement any best practices in formation provided by an
independent assessor but may consider such in formation consistent
with IMSA 's goal of "continuous improvement."
3. IMSA
will not recommend a prohibition at this time against "consulting
services" and independent assessment services being performed
by the same individual for the same member company until IMSA
can convene a committee of member company and independent
assessor representatives to further study the issue. The committee
will determine whether a narrowly crafted definition of "consulting
services" can be developed consistent with the intent to establish
appropriate independence and impartiality with respect to
the independent assessment of a company's policies and procedures.
IMSA will review whether the use of adequate disclosures,
"chinese walls," attestations or other techniques may be appropriate.
*
Selected provisions within the Final Recommendations will
be subject to further modifications based upon the work of
a committee comprised of member company representatives and
independent assessors.
IMSA Independent
Assessment Standards Review Final Recommendations October
30, 2002 Page 2 of 4
4. IMSA
will continue to retain its requirement to disclose selection
of an independent assessor affiliated with a firm that also
performs the independent audit of the company's financial
statements. When performing an independent assessment of a
company for whom the independent assessor's firm also performs
the independent audit of the company's financial statements,
the independent assessor will institute the following safeguards
to promote independence:
The
partner or principal serving as the independent assessor responsible
for the engagement shall not be involved in the independent
audit of the company's financial statements; - The independent
assessment team that works on the engagement shaII be separate
and distinct from the financial audit team; and
- Reports
to senior management on the results and/or progress of the
independent assessment shall be developed and delivered by
the independent assessor and shall not be subject to the prior
review of the partner involved in the independent audit of
the company's financial statements.
5. IMSA
will continue to retain its requirement for member companies
to disclose any conflict of interest with respect to their
selection of an independent assessor affiliated with a firm
that also performs other professional services for the company.
IMSA will convene a committee of member companies and independent
assessors to further study the types of non-independent assessment
activities and other professional services that may be permissible.
6. All
independent assessors will be required to submit to the audit
committee or other appropriate committee of a current or prospective
member company's Board of Directors or, in the absence of
an audit committee or other appropriate
committee, directly to the current or prospective member company's
Board of Directors, a summary of activities performed with
respect to the company's independent assessment. IMSA will
offer guidance to member companies and independent assessors
concerning the format and content of this report.
7. IMSA
will convene a committee of member companies and independent
assessors to consider the propriety of IMSA's current independence
standard and clarify those activities that might constitute
"conflicts of interest." The revised independence standard
will include a prohibition that would prevent any independent
assessor who conducts market conduct examinations for state
insurance departments on a contract basis from performing
IMSA Independent Assessment Standards Review an independent
assessment and a market conduct examination of the same member
company.
Final
Recommendations October 30, 2002 Page 3 of 4
8. IMSA
will develop clear guidelines with respect to performing appropriate
testing techniques and selecting sampling sizes commensurate
with a company's size, organizational structure, distribution
systems and risk exposures that will still permit independent
assessors to exercise business judgment while adhering to
minimum independent assessment practices consistent with the
guidelines. A committee of member companies and independent
assessors will be convened to develop these guidelines as
soon as possible.
9. To
the extent an IMSA member company seeks regulatory recognition
of its IMSA qualification, the member company is encouraged
to retain, at a minimum, documentation of its self-assessment
activities to demonstrate compliance with IMSA standards.
This documentation also may include any documentation developed
by the company's independent assessor. IMSA recognizes each
member company's right to determine whether to share IMSA-related
documentation with regulators based upon its own record retention
systems and/or the advice of counsel.
10. Independent
assessors will be required to complete an "Agreed-Upon Procedures
Report" to be developed by IMSA which will outline the testing
methods and types of evidence reviewed to determine compliance
with IMSA standards. A committee of independent assessors
and member company representatives will be convened as soon
as possible to develop the "Agreed-Upon Procedures Report"
The "Agreed-Upon Procedures Report" will include a requirement
consistent with the final agency action reporting requirement
under IMSA 's Post-Membership Market Conduct Guidelines.**
11. An
IMSA Independent Assessors' Handbook will be developed as
soon as possible. The IMSA Independent Assessors' Handbook
will include recommended independent assessment practices
as well as numerous examples to provide guidance to member
companies and independent assessors with respect to appropriate
testing techniques and sampling sizes to review evidence pertaining
to specific indicators used to support a company's affirmative
response to IMSA's Assessment Questionnaire. To the extent
possible, the Independent Assessors' Handbook will contain
a section tracking the testing techniques, sampling sizes
and areas of review prescribed by the NAIC Market Conduct
Examiners' Handbook. lndependent assessors will be required
and member company representatives will be encouraged to attend
IMSA training concerning the Independent Assessors' Handbook.
**
The final agency action reporting requirement under IMSA's
Post-Membership Market Conduct Guidelines will be distributed
for member company comment separately and will be reported
in final form thereafter.
IMSA Independent
Assessment Standards Review Final Recommendations October
30, 2002 Page 4 of 4
12. IMSA
will consider conducting an "after the fact" review of independent
assessment activities to provide reasonable assurance that
independent assessment practices are being performed consistently.
The review should be performed by IMSA or by individuals engaged
by IMSA who possess the requisite knowledge of IMSA standards
and the independent assessment process. IMSA will carefully
evaluate the efficacy of other independent assessment recommendations
throughout calendar year 2003 and consider the potential increased
costs and additional business interruption burdens prior to
implementing this recommendation.
|
