Life Insurance (prudential standard) determination No. 2 of 2006 - Prudential Standard LPS 510 - Governance
Audit CommitteeAudit Committee
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Audit Committee
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A life company must have an Audit Committee.[8] A life company (including an EFLIC) will need to comply with the requirements with respect to Audit Committees as set out in the Life Insurance Act.[9] Other Board Committees may have risk management responsibilities provided the Audit Committee retains the functions prescribed by section 92 of the Act.
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The Audit Committee must have sufficient powers to enable it to obtain all information necessary for the performance of its functions.
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The Audit Committee must have at least three members. A majority of members of the Committee must be persons who are not executive officers of the life company.[10] A majority of the members of the Committee must be independent.
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The chairperson of the Audit Committee must be an independent director of the life company.
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The chairperson of the Board can sit on the Audit Committee, but cannot chair the Committee.[11]
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The Audit Committee must have a charter that includes a reference to the fact that the Committee is responsible for the oversight of APRA statutory reporting requirements as well as other financial reporting requirements, professional accounting requirements, internal and external audit, the appointment of the life company’s external auditor,[12] and ensuring that the life company has a sound system of management and financial controls.[13]
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The Audit Committee should also be responsible for formulating the risk strategy of the life company, for determining policies that ensure the strategy is adhered to, and for monitoring adherence to those policies.
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The Audit Committee must review the external auditor’s engagement at least annually, including making an assessment of whether the auditor meets the Audit Independence tests set out in Professional Statement F1 Professional Independence,[14] as well as the additional auditor independence requirements set out in this Prudential Standard. For an EFLIC, it will be the responsibility of the Compliance Committee to undertake this assessment.
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The Audit Committee must regularly review the internal and external audit plans, ensuring that they cover all material risks and financial reporting requirements of the life company. It must regularly review the findings of audits, and ensure that issues are being managed and rectified in an appropriate and timely manner.