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Life Insurance (prudential standards) determination No. 14 of 2007 - Prudential Standard LPS 510 - Governance
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Turn the raw legal text into a practical explanation grounded in Life Insurance (prudential standards) determination No. 14 of 2007 - Prudential Standard LPS 510 - Governance.
A life company (including an EFLIC) must have a Board Audit Committee, which assists the Board by providing an objective non-executive review of the effectiveness of the life company’s financial reporting and risk management framework unless, with respect to risk management, there is another Board Committee which carries out this function.
The Board Audit Committee must have sufficient powers to enable it to obtain all information necessary for the performance of its functions.
The Board Audit Committee must have at least three members. All members of the Committee must be non-executive directors of the life company.[8] A majority of the members of the Committee must be independent.
The chairperson of the Board Audit Committee must be an independent director of the life company.
The chairperson of the Board can sit on the Board Audit Committee, but cannot chair the Committee.
The Board 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, and the appointment of the life company’s auditor.
The Board Audit Committee must review the auditor’s engagement at least annually, including making an assessment of whether the auditor meets the Audit Independence tests set out in APES 110 Code of Ethics for Professional Accountants,[9] 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.
The Board 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.
The Board Audit Committee must ensure the adequacy and independence of both the internal and external audit functions.
The members of the Board Audit Committee must, at all times, have free and unfettered access to senior management, the internal auditor, the heads of all risk management functions, the life company’s Auditor, and the Appointed Actuary and vice-versa.
The Board Audit Committee must establish and maintain policies and procedures for employees of the life company to submit, confidentially, information about accounting, internal control, compliance, audit, and other matters about which the employee has concerns. The Committee should also have a process for ensuring employees are aware of these policies and for dealing with matters raised by employees under these policies.
Members of the Board Audit Committee must be available to meet with APRA on request.
The Board Audit Committee must invite the life company’s Auditor and Appointed Actuary to meetings of the Committee.
The internal auditor must have a reporting line and unfettered access to the Board Audit Committee. For EFLICs, the auditor of the local operation must have direct access to the Head Office audit function.