WHAT ARE MY AUDITORS DOING?

Your Presenter

• Dianne Batistoni, CPA– EisnerAmper Insurance Group Audit Partner –

Bridgewater, NJ– 908-218-5002, ext. 2239– Dianne.batistoni@eisneramper.com

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

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Today’s Audit Environment – Cont’d

• Regulatory Changes

• RBC

• SSAP 10R

• Solvency II• Capital Requirements

• Governance, Risk Management and Supervision

• Disclosure and Transparency

• Company Failures/Liquidations

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Today’s Audit Environment - Cont’d

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• FASB & SAS

– Codification

– Record number of new pronouncements

• IFRS Conversion

– Fair Market Value

– Principles vs. Rules Based

• SSAP Impact?

Today’s Audit Environment – Cont’d

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• Other Factors

– PCAOB

– Peer Review

– State Examinations

– Audit Risk Alerts

Today’s Audit Environment – Cont’d

• 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

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

The Audit Process and Audit Efficiency

• Fraud Risk

– Who’s responsibility is it?

• Reputational Risk

• Regulator Risk

• Design Procedures to Respond to Risk

The Audit Process and Audit Efficiency

• Audit Approach

– Balance Sheet Approach?

– Leverage Existing Controls • Documented vs.

• Undocumented

– Materiality Concepts

– Risk-Linked Procedures

– Regulation Impact Considerations (Market Conduct)

– Actuarial Reviews

The Audit Process and Audit Efficiency

• Audit Reporting

– Financial Statements

– Report to Audit Committee (SAS 61)

– Independence

– Qualifications

– Internal Controls (115)

– Awareness Letters

– Audit Adjustments

Audit Efficiency

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

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Audit Efficiency – Cont’d

• 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

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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

Management Oversight – cont’d

• 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

Management Oversight – Cont’d

• Model Audit Rule Considerations

– Audit Partner Rotation Requirements

– Audit Committee Independence Rules

– Internal Control Assessment

Year-Round Relationships with your Audit Team

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 Service

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

Value Added Services

• 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

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Questions?

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