Md. Code Regs. 31.05.11.02

Current through Register Vol. 51, No. 24, December 2, 2024

Section 31.05.11.02 - Definitions

A. In this chapter, the following terms have the meanings indicated.

B. Terms Defined.

(1) "Accountant" or "independent certified public accountant" means:

(a) An independent certified public accountant or accounting firm in good standing with the American Institute of Certified Public Accountants (AICPA) and in all states in which the accountant is licensed to practice; and

(b) For a Canadian or a British company, a Canadian-chartered or British-chartered accountant.

(2) "Affiliate of", or person "affiliated with", a specific person, means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.

(3) Audit Committee.

(a) "Audit committee" means a committee, or equivalent body, established by the board of directors of an entity for the purpose of overseeing the:

(i) Accounting and financial reporting processes of an insurer or group of insurers;

(ii) Internal audit function of an insurer or group of insurers; and

(iii) External audits of financial statements of the insurer or group of insurers.

(b) "Audit committee" at the election of the controlling person pursuant to Regulation .13H-J of this chapter, may, for one or more controlled insurers, be deemed to be the audit committee of any entity that controls a group of insurers.

(c) "Audit committee" means the insurer's entire board of directors, if an audit committee is not designated by the insurer.

(4) "Audited financial report" means and includes those items specified in Regulation .04 of this chapter.

(5) "Group of insurers" means those insurers included in the reporting requirements of Insurance Article, § 7-601, Annotated Code of Maryland, or a set of insurers as identified by management, for the purpose of assessing the effectiveness of internal control over financial reporting.

(6) "Indemnification" means an agreement of indemnity or a release from liability where the intent or effect is to shift or limit in any manner the potential liability of the person or firm for failure to adhere to applicable auditing or professional standards, whether or not resulting in part from knowing of other misrepresentations made by the insurer or its representatives.

(7) "Independent board member" has the same meaning as described in Regulation .13E and F of this chapter.

(8) Insurer.

(a) "Insurer" means an insurer holding a certificate of authority issued by the Commissioner, or authorized to engage in the insurance business in this State, as defined in Insurance Article, §§ 1-101(v) and 4-101, Annotated Code of Maryland.

(b) "Insurer" includes:

(i) The Maryland Automobile Insurance Fund;

(ii) The Medical Mutual Liability Insurance Society of Maryland;

(iii) Nonprofit health service plans;

(iv) Dental plan organizations;

(v) Health maintenance organizations;

(vi) Managed care organizations; and

(vii) Provider-sponsored organizations.

(9) "Internal audit function" means a person or persons that provide independent, objective, and reasonable assurance designed to add value and improve an organization's operations and accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management and control and governance processes.

(10) "Internal control over financial reporting" means a process effected by an entity's board of directors, management, and other personnel designed to provide reasonable assurance regarding the reliability of the financial statements, that is, those items specified in Regulation .04B(2)-(6) of this chapter, and includes those policies and procedures that:

(a) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets;

(b) Provide reasonable assurance that:

(i) Transactions are recorded as necessary to permit preparation of the financial statements, that is, those items specified in Regulation .04B(2)-(6) of this chapter; and

(ii) Receipts and expenditures are being made only in accordance with authorizations of management and directors; and

(c) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could have a material effect on the financial statements, that is, those items specified in Regulation .04B(2)-(6) of this chapter.

(11) "NAIC" means the National Association of Insurance Commissioners.

(12) "SEC" means the United States Securities and Exchange Commission.

(13) "Section 404 " means Section 404 of the Sarbanes-Oxley Act of 2002, and the SEC's rules and regulations promulgated under it.

(14) "Section 404 report" means Management's Report on Internal Control over Financial Reporting as defined by the SEC, and the related attestation report of the independent certified public accountant as described in §B(1) of this regulation.

(15) "SOX compliant entity" means an entity that either is required to be compliant with, or voluntarily is compliant with, all of the following provisions of the Sarbanes-Oxley Act of 2002:

(a) The preapproval requirements of § 201 (§ 10A(i) of the Securities Exchange Act of 1934);

(b) The audit committee independence requirements of § 301 (§ 10A(m)(3) of the Securities Exchange Act of 1934); and

(c) The internal control over financial reporting requirements of § 404 (Item 308 of SEC Regulation S-K).

(16) Workpapers.

(a) "Workpapers" means the records kept by the independent certified public accountant of the procedures followed, the tests performed, the information obtained, and the conclusions reached pertinent to the accountant's audit of the financial statements of an insurer.

(b) "Workpapers" may include the following documents prepared or obtained by the independent certified public accountant in the course of an audit of the financial statements of an insurer and which support the accountant's opinion:

(i) Audit planning documentation;

(ii) Work programs;

(iii) Analyses;

(iv) Memoranda;

(v) Letters of confirmation and representation;

(vi) Abstracts of company documents; and

(vii) Schedules or commentaries.

Md. Code Regs. 31.05.11.02

Regulation .02 amended effective 44:4 Md. R. 255, eff. 2/27/2017; amended effective 45:24 Md. R. 1163, eff. 12/6/2018