Okla. Stat. tit. 36, § 36-311A.7

A. The Insurance Commissioner shall not recognize a person or

firm as a qualified independent certified public accountant if the

person or firm:

1. Is not in good standing with the AICPA and in all states in

which the accountant is licensed to practice, or, for a Canadian or

British company, that is not a chartered accountant; or

2. Has either directly or indirectly entered into an agreement

of indemnity or release from liability, collectively referred to as

indemnification, with respect to the audit of the insurer.

B. Except as otherwise provided in the Oklahoma Annual

Financial Report Act, the Commissioner shall recognize an

independent certified public accountant as qualified as long as the

accountant conforms to the standards of the profession, as contained

in the Code of Professional Ethics of the AICPA and Rules and

Regulations and Code of Ethics and Rules of Professional Conduct of

the Oklahoma Board of Public Accountancy, or similar code.

C. A qualified independent certified public accountant may

enter into an agreement with an insurer to have disputes relating to

an audit resolved by mediation or arbitration. However, in the

event of a delinquency proceeding commenced against the insurer

under Article 19 of the Oklahoma Insurance Code, the mediation or

arbitration provisions shall operate at the option of the statutory

successor.

D. 1. The lead or coordinating audit partner having primary

responsibility for the audit may not act in that capacity for more

than five (5) consecutive years. The person shall be 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. An insurer may make application to the

Commissioner for relief from the above rotation requirement on the

basis of unusual circumstances. This application should be made at

least thirty (30) days before the end of the calendar year. The

Commissioner may consider the following factors in determining if

the relief should be granted:

a. number of partners, expertise of the partners, or the

number of insurance clients in the currently

registered firm,

b. premium volume of the insurer, or

Oklahoma Statutes - Title 36. Insurance Page 84

c. number of jurisdictions in which the insurer transacts

business.

2. The insurer shall file, with its annual statement filing,

the approval for relief from paragraph 1 of this subsection with the

states that it is licensed in or doing business in and with the

NAIC. If the nondomestic state accepts electronic filing with the

NAIC, the insurer shall file the approval in an electronic format

acceptable to the NAIC.

E. The Commissioner shall neither recognize as a qualified

independent certified public accountant, nor accept an annual

audited financial report, prepared in whole or in part by, a natural

person who:

1. Has been convicted of fraud, bribery, a violation of the

Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C.

Sections 1961 to 1968, or any dishonest conduct or practices under

federal or state law;

2. Has been found to have violated the insurance laws of this

state with respect to any previous reports submitted under the

Oklahoma Annual Financial Report Act; or

3. Has demonstrated a pattern or practice of failing to detect

or disclose material information in previous reports filed under the

provisions of the Oklahoma Annual Financial Report Act.

F. The Commissioner may hold a hearing to determine whether an

independent certified public accountant is qualified and,

considering the evidence presented, may rule that the accountant is

not qualified for purposes of expressing the opinion of the

accountant on the financial statements in the annual audited

financial report made pursuant to the Oklahoma Annual Financial

Report Act and require the insurer to replace the accountant with
ermine whether an

independent certified public accountant is qualified and,

considering the evidence presented, may rule that the accountant is

not qualified for purposes of expressing the opinion of the

accountant on the financial statements in the annual audited

financial report made pursuant to the Oklahoma Annual Financial

Report Act and require the insurer to replace the accountant with

another whose relationship with the insurer is qualified within the

meaning of the Oklahoma Annual Financial Report Act.

G. 1. The Commissioner shall not recognize as a qualified

independent certified public accountant, nor accept an annual

audited financial report, prepared in whole or in part by an

accountant who provides to an insurer, contemporaneously with the

audit, the following non-audit services:

a. bookkeeping or other services related to the

accounting records or financial statements of the

insurer,

b. financial information systems design and

implementation,

c. appraisal or valuation services, fairness opinions, or

contribution-in-kind reports,

d. actuarially oriented advisory services involving the

determination of amounts recorded in the financial

statements. The accountant may assist an insurer in

understanding the methods, assumptions, and inputs

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used in the determination of amounts recorded in the

financial statement only if it is reasonable to

conclude that the services provided will not be

subject to audit procedures during an audit of the

financial statements of the insurer. The actuary of

an accountant may also issue an actuarial opinion or

certification on the reserves of an insurer if the

following conditions have been met:

(1) neither the accountant nor the actuary of the

accountant has performed any management functions

or made any management decisions,

(2) the insurer has competent personnel or engages a

third-party actuary to estimate the reserves for

which management takes responsibility, and

(3) the actuary of the accountant tests the

reasonableness of the reserves after the

management of the insurer has determined the

amount of the reserves,

e. internal audit outsourcing services,

f. management functions or human resources,

g. broker or dealer, investment adviser, or investment

banking services,

h. legal services or expert services unrelated to the

audit, or

i. any other services that the Commissioner determines,

by rule, are impermissible.

2. In general, the principles of independence with respect to

services provided by the qualified independent certified public

accountant are largely predicated on three basic principles,

violations of which would impair the independence of the accountant.

The principles are that the accountant cannot function in the role

of management, cannot audit the own work of the accountant, and

cannot serve in an advocacy role for the insurer.

H. Insurers having direct written and assumed premiums of less

than One Hundred Million Dollars ($100,000,000.00) in any calendar

year may request an exemption from paragraph 1 of subsection G of

this section. The insurer shall file with the Commissioner a

written statement discussing the reasons why the insurer should be

exempt from these provisions. If the Commissioner finds, upon

review of the statement, that compliance with the Oklahoma Annual

Financial Report Act would constitute a financial or organizational

hardship upon the insurer, an exemption may be granted.

I. A qualified independent certified public accountant who

performs the audit may engage in other non-audit services, including

tax services, that are not described in paragraph 1 of subsection G

of this section or that do not conflict with paragraph 2 of

subsection G of this section, only if the activity is approved in

Oklahoma Statutes - Title 36. Insurance Page 86

advance by the audit committee, in accordance with subsection J of

this section.
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performs the audit may engage in other non-audit services, including

tax services, that are not described in paragraph 1 of subsection G

of this section or that do not conflict with paragraph 2 of

subsection G of this section, only if the activity is approved in

Oklahoma Statutes - Title 36. Insurance Page 86

advance by the audit committee, in accordance with subsection J of

this section.

J. All auditing services and non-audit services provided to an

insurer by the qualified independent certified public accountant of

the insurer shall be preapproved by the audit committee. The

preapproval requirement is waived with respect to non-audit services

if the insurer is a SOX Compliant Entity or a direct or indirect

wholly-owned subsidiary of a SOX Compliant entity or:

1. The aggregate amount of all such non-audit services provided

to the insurer constitutes not more than five percent (5%) of the

total amount of fees paid by the insurer to its qualified

independent certified public accountant during the fiscal year in

which the non-audit services are provided;

2. The services were not recognized by the insurer at the time

of the engagement to be non-audit services; and

3. The services are promptly brought to the attention of the

audit committee and approved prior to the completion of the audit by

the audit committee or by one or more members of the audit committee

who are the members of the board of directors to whom authority to

grant such approvals has been delegated by the audit committee.

K. The audit committee may delegate to one or more designated

members of the audit committee the authority to grant the

preapprovals required by subsection J of this section. The

decisions of any member to whom this authority is delegated shall be

presented to the full audit committee at each of its scheduled

meetings.

L. 1. The Commissioner shall not recognize an independent

certified public accountant as qualified for a particular insurer if

a member of the board, president, chief executive officer,

controller, chief financial officer, chief accounting officer, or

any person serving in an equivalent position for that insurer, was

employed by the independent certified public accountant and

participated in the audit of that insurer during the one-year period

preceding the date that the most current statutory opinion is due.

This subsection shall only apply to partners and senior managers

involved in the audit. An insurer may make application to the

Commissioner for relief from the above requirement on the basis of

unusual circumstances.

2. The insurer shall file, with its annual statement filing,

the approval for relief from paragraph 1 of this subsection with the

states that it is licensed in or doing business in and the NAIC. If

the nondomestic state accepts electronic filing with the NAIC, the

insurer shall file the approval in an electronic format acceptable

to the NAIC.