Audit of Companies in the Insurance Sector, According to the International Association of Insurance Auditors (IAIS), the purpose of insurance auditing companies is to protect the insured by providing an efficient, impartial, reliable and stable insurance industry.
Audit of Companies in the Insurance Sector
Audit of Companies in the Insurance Sector can be defined as the evaluation of a person, organization, system, process, product, project or structure as a whole. For example, by subjecting a company to a financial audit, the validity and reliability of the financial records submitted by that company are examined.
In its most basic form, the examination can be divided into:
Internal Audit: It is the audit work and procedures performed by an organization’s own personnel to inspect its internal dynamics.
External Audit: It is the type of audit performed by responsible auditors who are not personnel of the organization they are auditing.
Onsite Audit – Remote Audit
On-site audit is the audit that auditors perform by physically going to the audited organization whereas remote audit is carried out remotely.
Private Audit – Public Audit
Private audit, whether internal or external, is an audit by the private sector. Public audit, on the other hand, means the audit carried out by public authority officials.
Public authority has to meticulously monitor sectors that can have a significant impact on society. Public institutions responsible for audit of some sectors ensure that the sectors operate in accordance with the laws and rules by using their regulatory and supervisory functions. Such institutions, vested with regulatory and supervisory powers by the public authority, are found in all developed markets.
There are similar regulatory and supervisory institutions in our country: Banking Regulation and Supervision Agency, Capital Markets Board, and Undersecretariat of Treasury.
There are four main purposes for the public authority to take such an active role in the supervision of certain sectors:
- Ensuring the market’s trust and stability
- Informing the public and raising awareness
- Protecting the consumer
- Crime reduction and prevention
Audit of the Insurance Industry… According to the International Association of Insurance Supervisors (IAIS), the purpose of audit of insurance companies is to protect the insured by providing an effective, impartial, reliable and stable insurance industry.
Who does the Insurance Audit Board audit?
It includes audits of all kinds of transactions of insurance companies operating in Turkey; reinsurance companies, organizations operating in insurance according to their special laws, insurance and reinsurance intermediaries, loss adjusting activities, actuaries and other persons engaged in insurance transactions or operating in the insurance field, The Insurance Supervisory Board.
Audit of the Insurance Industry
Audit of Companies in the Insurance Industry… According to the International Association of Insurance Auditors (IAIS), the purpose of auditing insurance companies is to protect the insured by providing an efficient, impartial, reliable and stable insurance industry.
Public Audit in the Turkish Insurance Sector
The public institution responsible for the regulation and supervision of the insurance sector in our country is the Undersecretariat of Treasury. In the internal structure of the Undersecretariat of Treasury, there are two units responsible for insurance business and transactions: General Directorate of Insurance and Insurance Supervisory Board.
The General Directorate of Insurance is responsible for the regulation and remote audit of the insurance industry. The Insurance Audit Board is responsible for on-site audits of the insurance industry.
External Audit in the Turkish Insurance Sector
In accordance with the Insurance Law, the balance sheets, profit and loss statements and other financial statements of insurance and reinsurance companies approved by the Undersecretariat of Treasury must necessarily be audited and announced by independent auditing firms.
Independent external audit companies that audit insurance and reinsurance companies reach one of the four opinions below as a result of the process.
If the auditor detects that the financial statements comply with the accounting principles and standards and with the relevant legislation in effect; there is no uncertainty that will affect the financial statements and that financial statements reflect the actual situation of the company, he declares a positive opinion.
If the auditor is unable to express a certain opinion, however, if the facts giving rise to this uncertainty are not so significant that they cause a negative opinion or no opinion at all, the auditor shall express a qualified opinion.
The auditor may express a negative opinion as a result of detected deviations from the accounting principles and standards according to the relevant legislation.
If uncertainties and restrictions about the audit work and scope are so significant as to prevent the auditor from expressing an unconditional or conditional opinion, or sufficient evidence cannot be obtained about a material matter in the financial statements due to an ineffective internal accounting system, the auditor may disclaim expressing an opinion on financial statements.
Internal Audit in the Turkish Insurance Industry
Audit of Companies in the Insurance Sector: It is the responsibility of the internal audit to supervise the compliance of the business and transactions of insurance and reinsurance companies with the relevant legal regulations, management strategies and policies. With a regulation issued by the Undersecretariat of Treasury, the internal control, internal audit and risk management systems of the companies in the sector and the binding procedures and principles regarding their operation are well regulated.
The objectives of internal audit, internal control and risk management are stated in the regulation as follows:
- The purpose of the internal control system is to protect company assets, to ensure that activities are carried out effectively and efficiently in accordance with the Law and other relevant legislation, – to make sure the accounting and financial reporting system and information are well-timed and in line with home policies, reliability and integrity.
- The purpose of the internal audit system is to provide assurance to the senior management that the company’s activities are carried out in line with the law and other relevant legislation and internal strategies, policies, principles and objectives, and that the internal control and risk management systems are effective and sufficient.
- The purpose of the risk management system is to identify, measure, monitor and control the risks detected.
Tax in Insurance
Various taxes are paid as a result of insurance business and transactions. This tax volume generated by insurance is one of the indirect contributions of the insurance industry.
To make a basic classification, taxes in the insurance sector can be classified as follows:
These are the taxes collected according to the income level of the individuals and institutions in which the taxpayer and the responsible payer are the same.
- Income tax
- Corporate tax
These are taxes on the use of goods and services in which everyone who enjoys pays at the same rate.
Banking and Insurance Transactions Tax
Just like in the value-added tax, insurance companies bear the liability of the mentioned tax. This is a temporary obligation and as a result, the tax is reflect upon the people who benefit from the services.
Fire Insurance Tax
The liable taxpayer of this tax is the insurance company. According to the relevant tax legislation, “the premiums received for fire insurance for movable and immovable properties within the boundaries of the municipality and in adjacent areas are subject to fire insurance tax.”
There are also some fund contributions that are not called taxes but must be collected within the scope of business and transactions in the insurance environment.