Prudential Authority in South Africa issues the Prudential Standards for audit requirements which commence on 1 January 2022

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Nicole Britton and Ernie Van Der Vyver

On 8 December 2021, the Prudential Authority in terms of section 63(1)(a) read with section 47(5) of the Insurance Act 18 of 2017 (Insurance Act), and section 42(b)(vi) of the Financial Sector Regulation Act 9 of 2017 has published Prudential Standards for audit requirements (Audit Prudential Standards) in respect of insurers, branches of foreign reinsurers, insurance groups, Lloyd’s and microinsurers (Insurers).

Inter alia, the Audit Prudential Standards (i) set out the information for supervisory purposes that Insurers must have audited, reviewed and reported on by their auditors to promote the credibility of the information with the Prudential Authority, policyholders and stakeholders of Insurers; (ii) the period within which Insurers must submit their audited annual financial statements to the Prudential Authority and disclose it to the public, namely, within 4 months after an Insurers financial year-end; and (iii) expressly record that the board of directors of an Insurer is responsible for ensuring that the Insurer meets the requirements set out in the Audit Prudential Standards on a continuous basis.

Of import, the Audit Prudential Standards specify that in addition to the information that Insurers must have audited annually in accordance section 47 of the Insurance Act, and as specified in paragraph 6 of the Audit Prudential Standards, in terms of sections 44(1) and 62(1)(c) of the Insurance Act, the Prudential Authority will also annually require a report in terms of the International Standard on Review Engagements for Insurers (ISRE) 2410 – Review of Interim Financial Information performed by the Independent Auditor of the Entity in respect of certain information in respect of Insurers.

The Audit Prudential Standards commence on 1 January 2022.

In addition, the Prudential Authority has published Guidance Notice 5 of 2021 – Guidance Notice – AR GN – Audit Requirements (Guidance Note). The Guidance Note aims to assist Insurers and controlling companies of insurance groups in complying with the requirements outlined in the Audit Prudential Standards. In particular, the Guidance Note sets out which sections of the return templates should be audited to satisfy the requirements under the Audit Prudential Standards.

The issuing of the Audit Prudential Standards and the Guidance Note follows the publication of the draft prudential standards for audit requirements and the draft Guidance Notice 1 of 2020 Audit requirements on 15 May 2020, and various public comments which were received on the draft prudential standards for audit requirements.

For a copy of:

  1. The Audit Prudential Standards:
    • in respect of insurers, please click here;
    • in respect of branches, please click here;
    • in respect of insurance groups, please click here;
    • in respect of Lloyd’s, please click here;
    • in respect of microinsurers, please click here;
  2. The Guidance Note, please click here.
  3. The consultation report to the draft prudential standards for audit requirements, please click here.
  4. The Statement of the Need which accompanied the draft prudential standards for audit requirements, please click here.