SOP for Insurance Auditors
In the past few years, the insurance industry has had to weather allegations of questionable sales practices and misleading policyholder illustrations. To promote higher standards of ethical behavior, the American Council of Life Insurers (ACLI), a trade organization, established the Insurance Marketplace Standards Association (IMSA). To join the IMSA, an insurance company has to meet a set of IMSA-established standards and complete a self-assessment to confirm it is following those standards; this self-assessment is subject to an audit by a CPA.
The ACLI believes the self-assessment will be more substantial if it has a third-party assessorsuch as a CPA auditor, said Elaine Lehnert, technical manager in the AICPA accounting standards division. So the AICPA has issued an SOP to provide guidelines to assist practitioners and help ensure that these attestation engagements are consistent with each other.
According to Lehnert, the SOP is aimed at practitioners with experience in auditing life insurance company financial statements. The AICPA also is advising CPAs considering such engagements to familiarize themselves with the IMSA program in general and its Assessment Handbook .
Because the ASB issued this SOP, and it thus does not affect GAAP, the SOP was not exposed for comment and did not require FASB clearance. (Practitioners perform IMSA engagements under the AICPA attestation standards.) The SOP amends Chapter 11, Auditors Reports, of the Industry Audit Guide Audits of Stock Life Insurance Companies . Lehnert stressed the SOP provides guidance for a voluntary service; it does not require auditors to perform IMSA engagements.
SOP 98-6, Reporting on Managements Assessment Pursuant to the Life Insurance Ethical Market Conduct Program of the Insurance Marketplace Standards Association (product no. 014908JA), is effective for independent assessments with IMSA report dates after January 31, 1998. To order a copy, call the AICPA at 888-777-7077.