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
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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
5
Today’s Audit Environment – Cont’d
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Regulatory Changes
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RBC
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SSAP 10R
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Solvency II
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Capital Requirements
Governance, Risk Management and Supervision
Disclosure and Transparency
Company Failures/Liquidations
6
Today’s Audit Environment - Cont’d
• FASB & SAS
– Codification
– Record number of new pronouncements
• IFRS Conversion
– Fair Market Value
– Principles vs. Rules Based
• SSAP Impact?
7
Today’s Audit Environment – Cont’d
• Other Factors
– PCAOB
– Peer Review
– State Examinations
– Audit Risk Alerts
8
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:
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Audit Risk
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Environmental Risk
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Directional Risk
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8- Hour Risk
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“What keeps you up at night?”
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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
15
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
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Leverage your relationship with your auditor
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Ask for auditor advice (Are they industry experts?)
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Ask for input
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Continuing communication
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Tax planning
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Make management recommendation letters a positive rather than
a negative
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Keeping informed regarding industry trends and technical
pronouncements
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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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