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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 assessor--such 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.

Technical authority

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, "Auditor's 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 Management's 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.

RELATED ARTICLE: FINANCIAL ACCOUNTING

A Silver Anniversary

In 1973, Reginald H. Jones, chairman of the board of General Electric, said the U.S. business community needed to build a bridge between the public's high expectations of business and low opinion of its accomplishments. He was speaking at the FASB's inaugural dinner. The board took up the challenge, and today the FASB still is serving as that bridge. Said FASB Chairman Edmund L. Jenkins, "I believe, in the last 25 years, the FASB has brought credibility to financial reporting." He pointed out the opportunity of U.S. markets: "Foreign companies are clamoring to raise money in our markets because of our lower costs of capital. This is in no small part due to our credible financial reporting system."

A system that works

Dennis R. Beresford, Jenkins' immediate predecessor, shared with the Journal some of his thoughts about the FASB. "I've often said facetiously that everyone supports the FASB at the `least bad' alternative. But hardly anyone really wants the government to take over FASB's job. The business community realizes that everyone gets to participate in the process, and that's been the FASB's great strength. All parties get their day in court."

Even as the world moves slowly toward unified international accounting standards, Beresford believes the FASB will continue to be the leading player in setting those standards.

"The entire accounting profession should be proud of the FASB," he said. "Through task forces and comment letters, so many people involve themselves in the process. Many tend to think of the FASB as just seven individuals, but you can credit the board's success to everyone who participates."

Those interested in more reflections on the board's history and role should turn to Jenkins' article about the founding of the board in the FASB's Status Report, issue no. 299. Jenkins will be writing more on the FASB's history in the Status Report throughout the year.
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Article Details
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Title Annotation:auditing standards
Publication:Journal of Accountancy
Article Type:Brief Article
Date:Jun 1, 1998
Words:616
Previous Article:Federal audit report card.
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