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The Actuarial Standards Board (ASB) recently adopted a final revision of Actuarial Standard of Practice (ASOP) No. 21, Responding to or Assisting Auditors or Examiners in Connection with Financial Audits, Financial Reviews, and Financial Examinations, which had been promulgated in 2004. The final revision of ASOP No. 21 can be viewed here.
A key change reflected in the revision includes expanding and clarifying the applicability of the ASOP to financial audits, financial reviews, and financial examinations relative to current practices, especially the risk-focused and prospective view used in these financial audits, financial reviews, and financial examinations.
The ASB decided in 2014 that a revision was necessary because financial audits, financial reviews, and financial examinations had evolved significantly over the previous 10 years. The 2004 version of ASOP No. 21 did not address the actuary’s responsibility with respect to process and controls in the Sarbanes-Oxley environment, and was adopted before the National Association of Insurance Commissioners promulgated the Model Audit Rule. Furthermore, audits and examinations are increasingly conducted on a risk-focused basis; all these factors contributed to the need for a revision of ASOP No. 21.
The standard will be effective for any actuarial work in connection with a financial audit, financial review, or financial examination for fiscal periods beginning on or after December 15, 2016.
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