In a packed Egan Center hearing room Monday, attendees heard NAIC/AICPA Working Group Chair Doug Stolte explain that reevaluation of the most contentious element of his panel’s attempt to emulate the Sarbanes-Oxley Act won’t begin until next year.
Stolte said revaluation of NAIC use of material from the Act’s Section 404 would not begin until subgroups currently reevaluating NAIC adoption of material from the Act’s Title II, concerning auditor independence, and Title III, concerning audit committees and corporate governance, completed their work, which will not be finished this year.
The meeting in Anchorage, Alaska’s convention center was probably the best attended of the many convened as part of the NAIC fall meeting because of the concern among insurers at having Sarbanes-Oxley become part of the states’ regulatory regime.
Especially interesting for insurers’ concerns about the Sarbanes-Oxley Act’s Section 404 and its proposed addition to the NAIC’s Model Audit Rule, was Pennsylvania Deputy Commissioner Steve Johnson’s statement that he believed management must, in statutory financial reporting, make assurance that the company’s internal control is adequate but that attestation of such assurance by the independent auditor might not be necessary. Johnson is a member of the working group.
The working group’s proposal to add Sarbanes-Oxley content to the NAIC’s Model Audit Rule debuted early this year, and NAMIC and other insurers objected strenuously, noting the expense and burden of another layer of solvency regulation and commenting to the Working Group that existing insurer solvency regulation was already powerful. The Sarbanes-Oxley Act of 2002 was Congress’s preventive measure for recurrence of the financial outrages associated with Enron, Tyco, Adelphia and other non-insurer corporations.
“We have told the working group and many individual regulators that the Section 404 provisions should not be added to state regulation,” said William Boyd, NAMIC’s financial regulation manager. “Some of the regulators believe that Sarbanes-Oxley is the golden talisman that will save them from insolvencies of domiciliary companies. It just won’t.”
The working group’s subgroup considering content from Sarbanes-Oxley Title II, headed by Iowa regulator Jim Armstrong, has raised company exemption limits from $25 million to $100 million for “prohibited services” – those that can’t be performed by independent audit firms doing audits of the company’s statutory statements.
For more information on this issue, contact Bill Boyd.
Posted: Thursday, September 16, 2004 12:00:00 AM. Modified: Thursday, September 16, 2004 1:06:15 PM.
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