WHAT ARE MY AUDITORS DOING?

1. WHAT ARE MY AUDITORS DOING?

2. Your Presenter • Dianne Batistoni, CPA • EisnerAmper Insurance Group Audit Partner – Bridgewater, NJ • 908-218-5002, ext. 2239 • Dianne.batistoni@eisneramper.com

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

4. The Audit Environment Today

5. 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

6. 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

7. 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?

8. Today’s Audit Environment – Cont’d • Other Factors • PCAOB • Peer Review • State Examinations • Audit Risk Alerts

9. 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

10. The Audit Process and Audit Efficiency

11. 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

12. The Audit Process and Audit Efficiency • Fraud Risk • Who’s responsibility is it? • Reputational Risk • Regulator Risk • Design Procedures to Respond to Risk

13. 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

14. 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

15. 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

16. 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

17. Management Oversight

18. 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

19. 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

20. Management Oversight – Cont’d • Model Audit Rule Considerations • Audit Partner Rotation Requirements • Audit Committee Independence Rules • Internal Control Assessment

21. Year-Round Relationships with your Audit Team

22. 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”

23. Value Added Service

24. 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

25. 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

26. Questions?

27. EisnerAmper LLP is an independent member firm of PKF International Limited Any tax advice in this communication is not intended or written by EisnerAmper LLP to be used, and cannot be used, by a client or any other person or entity for purposes of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any matters addressed herein. All information provided is of general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.