Agreeing the Terms of Engagement
The Appointed Auditor and the insurer agree on the terms of the engagement. In the case of an insurance group, the terms of engagement is between the Group Auditor and the parent entity of the insurance group. Such terms may be detailed in an engagement letter or other suitable form of written contract.
The requirement to audit the yearly statutory accounts of the insurer or review the annual accounts of the insurance group is in addition to the audit or review of financial reports required under the Corporations Act 2001 and is to be treated by the Appointed or Group Auditor as a separate audit engagement. In addition to the requirements of ASA 800, the Appointed or Group Auditor has regard to ASA 210 Agreeing the Terms of Audit Engagements when agreeing on the terms of the engagement with the insurer and/or insurance group.
The audit or review of financial reports required under the Corporations Act 2001 and the audit of the yearly statutory accounts or review of the annual accounts required under the Act are directed towards obtaining sufficient evidence to form an opinion or conclusion under the appropriate legislation. These audit and review procedures are not designed to enable the Appointed or Group Auditor to conclude on matters specified in paragraph 56 of this Guidance Statement. The requirement for an Appointed or Group Auditor to provide a review report under GPS 310 therefore constitutes a separate engagement with separate reporting requirements. The Appointed or Group Auditor has regard to ASAE 3000 when agreeing on the terms of the review engagement.
It is important that those charged with governance of the insurer or insurance group are aware of the Appointed or Group Auditor’s obligations referred to in GPS 310 and of the implications for confidentiality. It is important also that the engagement letter includes a reference to the responsibility of those charged with governance of the insurer or insurance group for establishing and maintaining effective internal control.
The engagement letter explains that any special purpose engagement of specific matters relating to the insurer’s or insurance group’s operations, risk management or financial affairs, will constitute a separate engagement(s) and that the details of such engagement(s) will be the subject of a separate engagement letter(s).
Example engagement letters to accommodate APRA reporting requirements as per GPS 310 are set out in Appendix 4: General Insurer and Appendix 5: Level 2 Insurance Group of this Guidance Statement.