APRA Prudential Standards

The primary objective of general insurance Prudential Requirements is the protection of the interests of policyholders and prospective policyholders. This Guidance Statement acknowledges that the auditor of an insurer and an insurance group, has an important role to play in the prudential supervision process.

Reporting requirements imposed on the Appointed Auditor of a general insurer and the Group Auditor of the insurance group by APRA are in addition to the audit and review of financial reports required under the Corporations Act 2001. Section 49 of the Insurance Act 1973 (the Act), in conjunction with APRA Prudential Standard GPS 310 Audit and Related Matters (reissued in January 2013), include the following additional requirements of the Appointed Auditor and Group Auditor:

1. Appointed Auditor
   1. an audit (reasonable assurance) of the insurer’s yearly statutory accounts;
   2. a review (limited assurance), on an annual basis, of the insurer’s systems, procedures and controls designed to address compliance with all applicable Prudential Requirements and to enable the insurer to report reliable financial and statistical information to APRA;
   3. a review (limited assurance), on an annual basis, of the insurer’s compliance, in all significant respects, with its Risk Management Strategy (RMS) and Reinsurance Management Strategy (REMS);
   4. a special purpose engagement (which may be an audit, review or agreed upon procedures), where requested by APRA in writing, of specific matters relating to the insurer’s operations, risk management or financial affairs; and
   5. non routine reporting under sections 49, 49A and 49B of the Act, where APRA requests specific information, or where the auditor possesses reportable information specified in that Act or where the auditor considers that the provision of information would assist APRA in performing its functions under the Act.
2. Group Auditor
   1. a review (limited assurance) of the annual accounts of the group;
   2. a review (limited assurance), on an annual basis, of the group’s systems, procedures and controls designed to address compliance with all applicable Prudential Requirements and to enable the group to report reliable financial and statistical information to APRA;
   3. a review (limited assurance), on an annual basis, of the group’s compliance, in all significant respects, with its Risk Management Strategy (RMS) and Reinsurance Management Strategy (REMS);
   4. a special purpose engagement (which may be an audit, review or agreed upon procedures), where requested by APRA in writing, of specific matters relating to the group’s operations, risk management or financial affairs; and
   5. non routine reporting under sections 49, 49A and 49B of the Act, where APRA requests specific information, or where the group auditor possesses reportable information specified in that Act or where the Group Auditor considers that the provision of information would assist APRA in performing its functions under the Act.

Previously, GPS 310 only dealt with prudential requirements for general insurers and their appointed auditors. Prudential Standard GPS 3111 issued in December 2011, dealt separately with the requirements for insurance groups and their group auditors. The reissued GPS 310 now incorporates the prudential requirements in relation to the insurance group and the group auditor.

Guidance Statement GS 004

This Guidance Statement has been developed to assist the Appointed Auditor of a general insurer and the Group Auditor of an insurance group in reporting, pursuant to the prudential reporting requirements specified by APRA and not in relation to reporting on the audit of the financial report of an insurer or insurance group, for which mandatory requirements and explanatory guidance are provided in Auditing Standard ASA 700 Forming an Opinion and Reporting on a Financial Report.

This Guidance Statement is to be read in conjunction with Standard on Assurance Engagements ASAE 3000 Assurance Engagements Other than Audits or Reviews of Historical Financial Information, Auditing Standard ASA 800 Special Considerations-Audits of Financial Reports Prepared in Accordance with Special Purpose Frameworks, and relevant APRA Prudential requirements and best practice guidance in this area.