Accreditation and Regulation of Insurance Auditors

Applies to insurance/reinsurance companies, professional reinsurers, brokers, agents, mutual benefit associations (MBAs), and trusts for charitable uses, including their external auditors and auditing firms.

External Auditor: An independent CPA responsible for expressing opinion on financial statements.
Auditing Firm: Partners or sole practitioners providing audit services.
Fraud: Intentional acts leading to misrepresentation in financial statements (e.g., falsification, misappropriation).
Error: Unintentional mistakes in financial statements.
Gross Negligence: Reckless disregard of duty to comply with auditing standards.
Material Information: Information affecting users' economic decisions.
Audit Engagement Letter: Document outlining auditor’s acceptance, scope, responsibilities, and reporting.
Associate, Lead Partner, Concurring Partner, Auditor-in-Charge: Various roles within the auditing process.
Entities: Companies under the Commission’s jurisdiction.

Only Commission-accredited auditors and firms may conduct statutory audits.
Signing partners and auditors must be individually accredited.
Accreditation does not relieve management’s responsibility for financial statements.
The Commission is not liable for issues arising from auditor selection.
Accreditation expires after three years unless renewed.

Entities engaged the same external auditor for 5+ years must change auditor or rotate key audit partners within one year.
Auditors must be registered with PRC/BOA and comply with the Code of Professional Ethics.
Audits must be conducted per Philippine Standards on Auditing (PSA).
Auditors require at least 5 years regular audit experience, with 2 years in insurance entities (or relevant seminar participation).
Auditing firms must have at least one accredited or qualifying signing partner.

Submit a notarized application with documents: PRC license, Audit Engagement Letter, insurance-related course certification, undertakings related to conflicts of interest, PRC certification of good standing, working papers preservation oath, and certification of regulatory knowledge.
Renewal requires similar documentation plus proof of yearly insurance-related training.
Initial and renewal applications require a fee of Php 2,000.

Submission of notarized application signed by managing partner with documents: PTR, BOA/PRC registration, insurance-related course certifications, Audit Engagement Letter, audit contracts list, conflict of interest undertakings, PRC certification of good standing for audit team, quality assurance policies, working papers preservation, insurance-related seminar attendance proof, audited financial statements, and at least one accredited signing partner.
Renewal requires updated documents and certification of required training.
Initial and renewal applications require a fee of Php 5,000.

Accredited auditors or firms are prohibited from providing non-audit services to audit clients that compromise independence (e.g., bookkeeping, actuarial, management functions).
Compliance with engagement letters, GAAS, IAS, insurance core principles, Code of Professional Ethics, and relevant laws is mandatory.
Quality control policies and changes must be submitted to the Commission, with deemed approval if no objection within 90 days.

Auditors must report to the Commission: material fraud/errors, under-reserving causing capital deficiency, insolvency risks.
Findings must also be submitted to clients’ management/internal audit.
Reports to the Commission must be filed within 30 business days using prescribed forms.
Contracts must include clauses protecting auditors from liability for reporting to the Commission.

Non-disclosure of material findings.
Ethical violations, willful misrepresentations, criminal convictions involving moral turpitude or fraud.
Refusal to submit documents for investigation.
Gross negligence resulting in non-compliance with auditing or accounting standards.
Engagement in prohibited non-audit services.
For auditing firms, grounds also include willful misrepresentations, dissolution, significant suspension or delisting of key auditors, involvement in major scandals.

Progressive fines for firms and auditors: First offense (Php 100,000 firm / Php 50,000 auditor), second offense (Php 200,000 / Php 100,000), third offense (Php 400,000 / Php 200,000).
Penalties do not preclude administrative or criminal sanctions.
Commission may reduce penalties based on mitigating circumstances.
Entities knowingly engaging non-accredited auditors face Php 100,000 penalty plus other sanctions.

Circular covers audited financial statements for periods beginning January 1, 2004, and onwards.