Performing statutory audits to regulated entities is always challenging for the engaging auditors primarily due to the risk involved expressing their audit opinions. This risk increases exponentially when the audit concerns Insurance Companies as they are considered within the EU (and possibly the rest of the world) as Public Interest Entities (PIE).

In this short article we explain our lessons learned from our experience auditing local insurance firms:

 

Team of Experts is always required at the Highest Level
The audit team must always compromise a team of specialists which will take care of specific functions needed for the insurance industry. These functions are not common to ordinary audit engagements which require less sophistication and are exposed to less risk areas. It is imperative for the auditor to have assembled the right team which comprehends the challenges faced by insurance companies at operational, reporting and compliance levels.

Such challenges, amongst many, is the adoption to new IFRSs standards that have material impact on the financial position and performance of the insurance company, actuary review of workings models and parameters used by the insurance company, IT review of the insurance company’s infrastructure, internal audits to its systems and controls, to mention a few.

How our firm overcomes such barriers is offcourse by assembling the right teams of experts from our various networks which comprise of regulated audit and assurance firms from all over the world with insurance expertise. With a simple request we obtain recommendations of the most suitable and available experts needed to structure the team for any insurance audit engagements.

Conclusion: Access to such professional networks are imperative for any audit & assurance firm interested in performing such statutory engagements as the experts needed will ensure that it will not fail to comprehend, assess, test and perform an overall meaningful audit based on a risk based approach to the client.

 

2. Quality of the work performed is scrutinised by the local regulators
Being the auditor of regulated entities and especially PIE entities brings significant challenges to the engaging audit firm as its local Cyprus regulator ADELP / Cypaob will perform physical visits to the premises of the auditor and inspect not only the quality of the audit performed but also the quality of the firms office policies and procedures.

This is an exhausting, detailed review of at fieldwork and office level which requires hundreds of man hours spent by the audit and assurance firm trying to cope with the suggestions and findings of the audit regulator.

It is proven and widely agreed amongst peers that being inspected by the local audit and assurance regulator cypaob, the most challenging part is to comply with the office policies and procedures as described and requested by the regulator. This is because the Cyprus regulator requires the highest standards from Cyprus auditors of PIE entities in accordance with international and EU standards. However, contrary to other European countries, Cyprus is a small island and so are its local audit & assurance firms which find it extremely difficult to comply with such regulations designed for larger audit firms.

In essence, the same complexity of systems and procedures will be required of a regulated audit and assurance firm licensed in Cyprus as they would to a French audit and assurance firm which could be auditing a multinational French Insurance Company!

Conclusion: Unless the audit firm intends to specialise in the provision of audit services to insurance companies and has the resources to keep up with regulators demanding requests which are ongoing, it should not engage in this industry.

Irrespective of the fee package, which initially may appear attractive, the amount of hours the firm will spend subsequent the completion of the audit in both file and office level will challenge the profitability of the engagement. This is a key consideration to be considered by all local Cyprus Audit & Assurance firms interested in statutory audit engagements of insurance companies.

 

3. Coordination and Logistics
Insurance company engagements are big in every aspect. The numbers are huge, the complexities are big, the need for expertise is high and offcourse the amount of work to be performed is enormous!

Given the large volume of transactions and risk areas that need to be reviewed by the local auditors and their team of experts, communication amongst the teams is imperative.

Client assistance is needed in every step of the way and the communication should be performed in an organised and structured manner as it will affect the deliverables and deadlines.

The engaging partner should carefully consider the logistics of the engagement at the onboarding and planning stage and allow adequate and sufficient time for its team of experts to perform their work without affecting the scheduled work of the remaining portfolio of clients as well as the ongoing fieldwork progress of audit engagements.

Sometimes teams of experts need to fly from abroad and be accommodated in Cyprus to perform their work (usually independent actuaries) whilst some aspects of their work can be performed remotely. Such details need to be discussed, communicated and agreed at the engagement phase of the audit and then be included in the planning phase of the audit in order to meet efficiencies, deliverables and quality work at the end of the engagement.

Conclusion: Discuss all team members' needs and clients’ needs in detail, consider resource allocation well in advance in order to plan and budget the audit correctly to deliver a high quality audit work within stated deadlines.

 

Overall Conclusions:
Our firm has been engaged in several insurance audit engagements successfully over the last few years. This was achieved by treating such engagements as highly risky audit engagements, requiring a high level of expertise, resources, planning as well as a significant amount of financial cost to the firm post audit completion.

To penetrate the Cyprus Insurance Industry we have created different teams which are becoming highly specialised in the space. Actuarial work, IFRSs specialised work as well as IT review of systems and architecture services are commonly acquired by our networks experts. This ensures that the most experienced and technically accredited professionals are servicing our clients either remotely or locally here in Cyprus.

 

CYAUSE AUDIT SERVICES

About Us

CYAUSE Audit Services is a regulated audit and assurance firm with offices in Nicosia and Limassol. Our firm specialises in the licensing and audit of local insurance agents / brokers and insurance companies. We have been engaged to perform the audit of the largest insurance company in Cyprus successfully and we have helped tens of non European insurance brokers and agents to use Cyprus as a vehicle to passport through Europe.

During 2015 we have been awarded by I.C.P.A.C and the A.C.C.A (local and international association of Chartered Certified Accountants) for the Quality of our Audit Services and our Office's Procedures.

Being a Truly International Audit & Assurance firm, we have associates from all over the world and we are constantly looking for new associates to expand our network further. At present, CYAUSE Audit Services operates internationally via BKR International one the largest associations in the world and Accace Circle, a co-created business community of like-minded BPO providers and advisors who deliver outstanding services with elevated customer experience.

Our network covers almost 40 jurisdictions with over 2,000 professionals, it supports more than 10,000 customers, mostly mid-size and international Fortune 500 companies from various sectors, and processes at least 170,000 payslips globally.

CYAUSE Audit Services Ltd is also a member of the 3E Accounting Network, an international accounting network which originates from Hong Kong and has more than 80 members from all over the world.

Contact Us

If you would like us to assist you with your investment firm or fund please contact us at kt@cyprusaccountants.com.cy or call us at +357 22 336 321.

Learn More about Cyprus Corporate Environment

Information about CYAUSE Audit Services and the Cyprus Corporate & Tax System can be obtained from our Website or our YouTube channel which provides valuable information about the Corporate & Tax Environment of Cyprus.