![]() If such a reference is made, however, management must identify the acquired business excluded and indicate the significance of the acquired business to the registrant's consolidated financial statements. In such instances, we would not object to management referring in the report to a discussion in the registrant's Form 10-K or 10-KSB regarding the scope of the assessment and to such disclosure noting that management excluded the acquired business from management's report on internal control over financial reporting. However, we acknowledge that it might not always be possible to conduct an assessment of an acquired business's internal control over financial reporting in the period between the consummation date and the date of management's assessment. However, since this role may be new to both parties, the necessary SAS 70 work may not have been previously contemplated by the parties and completed.Ī: As discussed above, we would typically expect management's report on internal control over financial reporting to include controls at all consolidated entities. We would also observe that the seller will be considered a service provider for the entity. It will take time for the reinsurer to assess and test its own internal control system. Whether the company had purchased an entity including its systems and employees or just reinsured all the results of the insurance contracts through a reinsurance contract, the systems generating the financial information are the same. The thousands of insurance contracts involved are maintained on an administrative system that is, typically, the seller's system. For a period of time, until controls can be tested, significant financial statement amounts will be based on the internal controls put in place by the seller. These life insurance company reinsurance transactions have many of the same issues surrounding testing internal controls as do business combinations. Under this arrangement, the buyer assumes all the risks and rewards of the policies, but such acquisitions do not qualify under EITF 98-3 as a "business" acquisition. If management states in their report that internal control over financial reporting is ineffective or the auditor's report takes any form other than an unqualified opinion and these reports are not included in the annual report to shareholders, our view is that an issuer would have to consider whether the annual report to shareholders contained a material omission that made the disclosures in the annual report misleading."Ī life insurance company may purchase a portion of another insurer's operations under a reinsurance arrangement. ![]() In the interim, we encourage issuers to include both management's report on internal control over financial reporting and the auditor's report on management's assessment of internal control over financial reporting in the annual report to shareholders when their audited financial statements are included. We intend to recommend to the Commission that amendments be made to Rules 14a-3 and 14c-3(a) and Item 13 of Schedule 14A to include such a requirement. 22 of the FAQ, states that "the intent of Section 404 of the Sarbanes-Oxley Act and the Commission's rules is that a registrant's audited financial statements with an accompanying audit report that are contained in or accompany a proxy statement or consent solicitation statement also be accompanied by management's report on internal control over financial reporting and the auditor's report on management's assessment of internal control over financial reporting. Regarding the date of issuance matter, question No. ![]() Note: On October 6, 2004, the SEC issued a revision to its publication entitled Management's Report on Internal Control over Financial Reporting and Disclosure in Exchange Act Periodic Reports-Frequently Asked Questions (FAQ).
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |