IMPACT OF SOX 404, NAIC Annual Financial Reporting Model Regulation (NAIC Model Audit Rule) NAIC Model Regulation
(NEW REPORT ISSUED ON JUNE 22, 2009)
Newly compliant NAIC Model Regulation non public insurance companies can glean information about material weaknesses in internal controls over financial reporting by analyzing the results of publicly held insurance companies. The following is a summary of ALL of the adverse 404 reports that were issued from companies in the Insurance industry with years ended in 2004 through 2008. These were all publicly held insurance companies reporting material weaknesses in internal controls over financial reporting. The management assessments were gathered using the online research tool called Audit Analytics, an Ives Group, Inc company. Since SOX assesses internal controls over financial reporting similar to AFRMR, this data represents likely deficiencies to be found with companies undertaking AFRMR.
The following table is a summary of the material internal control weaknesses and the accounting weaknesses reported in the ten adverse SOX Section 404 Self Assessments.
We can see from the following chart that the NAIC Model Regulation will not only relate to identifying material weaknesses in internal controls, but also material weaknesses in financial reporting (internal controls over financial reporting). Therefore many material weaknesses related to the misapplication of generally accepted accounting principles and related financial statement disclosures.
One should keep in mind too that the codification of the Statements of the Financial Accounting Standards will take place after July 1, 2009.
The following illustrates the departures from GAAP: