Independent Auditor Policy Nationwide Mutual Insurance Company Nationwide Mutual Fire Insurance Company Nationwide Corporation

Transcription

1 Independent Auditor Policy Nationwide Mutual Insurance Company Nationwide Mutual Fire Insurance Company Nationwide Corporation The Independent Auditor Policy (the Policy ) of Nationwide Mutual Insurance Company ( NMIC ), Nationwide Mutual Fire Insurance Company ( NMFIC ) and Nationwide Corporation ( NC ) applies to each entity within the Nationwide enterprise including NMIC, NMFIC, NC, Farmland Mutual Insurance Company and each of their respective subsidiaries (collectively, Nationwide ) as adopted by each of their respective governing bodies. The Policy addresses (1) Nationwide s general policy on auditor independence, (2) rotations of the audit firm and its lead and review partners, (3) the hiring of staff from the independent auditor firm, and (4) use of the independent auditor for professional services. For purposes of this Policy, reference to Audit Committee, Chairman of the Audit Committee or Office of the Chief Accounting Officer shall refer to the Audit Committee, the Chairman of the Audit Committee or the Office of the Chief Accounting Officer of NMIC, NMFIC and NC. General Policy At a minimum, it is Nationwide s policy to adhere to all relevant laws, regulations, and guidelines related to auditing matters as promulgated by various organizations having regulatory or oversight authority over the accounting profession and Nationwide s relationship with its independent auditors, including, but not limited to, the NAIC Model Audit Rule as adopted in all applicable states. Nationwide will regularly review this policy to meet new legal requirements and to evaluate best practices. Rotation of the Independent Auditor The NAIC Model Audit Rule, as adopted in all applicable states, requires insurance companies to have an annual audit performed on a statutory ( STAT ) basis by an independent certified public accountant (hereinafter referred to as the independent auditor ). The NAIC Model Audit Rule also requires the independent auditor firm to rotate the lead audit partner role every five years. In addition, the Sarbanes Oxley Act of 2002, applicable to public companies, requires that the audit review partner must also rotate every five years. A person acting as lead audit partner or audit review partner is then disqualified from acting in that or a similar capacity for the same company or its insurance subsidiaries or affiliates for a period of five (5) consecutive years. Nationwide s policy is that each Nationwide entity will comply with these requirements, as well as any additional requirements of applicable law or regulation. Mandatory rotation of independent auditor staff other than the lead and review partners is not deemed necessary by the Audit Committee, as these positions tend to experience a natural rotation sufficient to maintain firm independence. Nationwide s management will inform the Audit Committee if rotation of independent auditor staff is not occurring as expected. Hiring Employees of the Independent Auditor The NAIC Model Audit Rule, as adopted in all applicable states, prohibits an accounting firm from being deemed a qualified independent auditor for a particular insurance company if a member of the board, or the president, chief executive officer, chief financial officer, controller, 1

2 chief accounting officer, or persons in equivalent positions, were employed by the independent auditor and participated in any capacity in the audit of the insurance company during the one year period preceding the date of the initiation of the audit. Nationwide s policy is that each Nationwide entity will comply with this law. In order to ensure compliance with this law, and to enhance both the appearance and certainty of independence on behalf of the independent auditor, the following policies apply: Nationwide will not hire, or have any discussions about hiring, the lead audit partner or any other partner engaged in any Nationwide audit. However, a partner formerly involved in any Nationwide audit may be hired after a period of two years subsequent to the partner s involvement in the audit with the Audit Committee s prior approval. Nationwide may periodically hire employees of the independent auditor that are not partners on any part of any Nationwide audit, including non-partners involved in such audits. However, the Audit Committee must pre-approve any hiring of an individual directly from the independent auditor firm into any officer level position within Nationwide. The Nationwide Chief Accounting Officer must approve the hiring of any staff from the independent auditor firm. Types of Services and Audit Committee Pre-approval There are four categories of services the independent auditor may provide to Nationwide as follows: Audit Services Audit services include activities that directly relate to the issuance of the auditors report on the various legal entities that are audited within Nationwide. Each year the independent auditor submits to the Audit Committee a list of audit reports that will result from the annual audit. An audit fee is estimated and presented to the Audit Committee that specifically relates to these deliverables. The Audit Committee pre-approves both the services and related fees. Such the Audit Committee for pre-approval. No audit service may be performed for any 2

3 Audit Related Services Audit related services include those activities performed by the independent auditor for Nationwide that are indirectly related to the financial statement audits but are not required to enable the auditor to form its opinion on those financial statements. Each year the independent auditor submits to the Audit Committee a list of audit-related reports (e.g., SOC 1 reports) that management has requested. A fee related to these deliverables is estimated and presented to the Audit Committee. The Audit Committee pre-approves both the services and related fees. Such the Audit Committee for pre-approval. No audit related service may be performed for any Tax Services Each year the independent auditor submits to the Audit Committee a list of tax services (e.g., IRS examination assistance) that management has requested, if any, for Nationwide. A fee related to these deliverables is estimated and presented to the Audit Committee. The Audit Committee pre-approves both the services and related fees. Such specific pre-approval may be provided at a meeting of the Audit Committee or, between meetings, as necessary, by the Chairman of the Audit Committee to whom pre-approval authority has been delegated. The Chairman will update the full Audit Committee at the next Audit Committee meeting for any interim approvals granted. All requests or applications for services to be provided by the independent auditors that are not contemplated by this annual pre-approval process, including requests to increase the budget for an approved service, will be submitted to the Office of the Chief Accounting Officer. The Office of the Chief Accounting Officer will confirm whether or not such services and/or budget is outside the scope of the annual pre-approved services and budget and will submit appropriate requests and applications to the Audit Committee for preapproval. No tax service may be performed for any Nationwide entity without the preapproval of the Audit Committee. Non-Audit Services Each year the independent auditor will submit to the Audit Committee a list of non-audit reports (e.g., internal control letter not required by a regulatory body) that management has requested, if any, for Nationwide. A fee related to these deliverables is estimated and presented to the Audit Committee. The Audit Committee pre-approves both the services and related fees. Such 3

4 the Audit Committee for pre-approval. No non-audit service may be performed for any Auditor Independence In general, there are three principles of independence with respect to audit and non-audit services that, if violated, would impair the accountant s independence: (1) the accountant cannot function in the role of management; (2) the accountant cannot audit his or her own work, and; (3) the accountant cannot serve in an advocacy role for the insurer. A list of prohibited services follows: Bookkeeping or other services related to the accounting records or financial statements of Nationwide; Financial information systems design and implementation; Appraisal or valuation services, fairness opinions, or contribution-in-kind reports; Actuarially-oriented advisory services involving the determination of amounts recorded in the financial statements; except as follows: The accountant may assist Nationwide in understanding the methods, assumptions and inputs used in the determination of amounts recorded in the financial statements if the services provided will not be subject to audit procedures during an audit of the financial statements. An accountant's actuary may also issue an actuarial opinion or certification ( opinion ) on an insurer's reserves if the following conditions have been met: Neither the accountant nor the accountant's actuary has performed any management functions or made any management decisions; Nationwide has competent personnel (or engages a third party actuary) to estimate the reserves for which management takes responsibility; and Nationwide s actuary tests the reasonableness of the reserves after Nationwide s management has determined the amount of the reserves. Internal audit outsourcing services; Management functions or human resources; Broker or dealer, investment advisor, or investment banking services; Legal services and expert services unrelated to the audit; and 4

5 Any other service that the commissioner of insurance determines, by regulation, is impermissible. All services provided by the independent auditor as sub-contractor to any Nationwide vendor (e.g., attorney, consultant, etc.) are subject to this policy and pre-approval process. Services to Executives Elected officers of any Nationwide entity are prohibited from engaging the independent auditor to perform any personal service on their behalf (e.g., tax planning, estate planning, etc.). Monitoring and Reporting The Audit Committee periodically monitors the services rendered by and actual fees paid to the independent auditors to ensure that such services are within the parameters it pre-approved. The Chief Accounting Officer tracks all fees paid to the independent auditor for all services. Any service being contemplated by any Nationwide entity must be submitted to the Chief Accounting Officer for approval. Any project that is started without approval, and is subsequently disapproved, will be terminated. Anticipated project starting times should consider the potential time lag required in obtaining Audit Committee approval, if required. Adopted October 3,