Instructions on the Conditions to be Met by the External Auditor for Insurance Companies No. 15 of 2024

[Central Bank of Jordan Logo]Number: 10/2/16258Date: 4/4/1446Corresponding to: 7/10/2024To: Respected Insurance CompaniesSubject: Instructions on the Conditions to be Met by the External Auditor for Insurance Companies and the Scope of Their Work and Duties No. (15) of 2024Based on the provisions of Paragraph (a) of Article (32) and Paragraph (b) of Article (109) of the Insurance Business Regulation Law No. (12) of 2021, I enclose herewith the Instructions on the Conditions to be Met by the External Auditor for Insurance Companies and the Scope of Their Work and Duties, issued pursuant to the Central Bank Board of Directors' Decision No. (155/2024) dated 15/9/2024.Please accept our highest regards,,,GovernorDr. Adel Al-SharkasCopy to:Respected Jordanian Insurance Federation.---[Central Bank of Jordan Logo]Number: 10/2/16258Date: 4/4/1446Corresponding to: 7/10/2024[Frame containing the following text]Instructions on the Conditions to be Met by the External Auditor for Insurance Companies and the Scope of Their Work and Duties No. (15) of 2024---[Central Bank of Jordan Logo]Instructions on the Conditions to be Met by the External Auditor for Insurance Companies and the Scope of Their Work and Duties No. (15) of 2024---Instructions No. () of 2024Instructions on the Conditions to be Met by the External Auditor for Insurance Companies and the Scope of Their Work and DutiesIssued by the Central Bank Board of DirectorsPursuant to the provisions of Paragraph (a) of Article (32)And Paragraph (b) of Article (109)Of the Insurance Business Regulation Law No. (12) of 2021ContentsPageArticle (1): Attribution ................................................................................... 2Article (2): Definitions ................................................................................. 2Article (3): Audit Service Policy .................................................................... 3Article (4): Nomination and Election of the Audit Firm .................................... 5Article (5): Independence and Objectivity of the Audit Firm and Team ............ 6Article (6): Additional Services ....................................................................... 7Article (7): General Provisions ....................................................................... 8Article (8): Decisions .................................................................................. 8Article (9): Repeal .................................................................................... 9Page 1 of 9---Article (1): AttributionThese instructions shall be called (Instructions on the Conditions to be Met by the External Auditor for Insurance Companies and the Scope of Their Work and Duties for the year 2024) and are issued pursuant to the provisions of Paragraph (a) of Article (32) and Paragraph (b) of Article (109) of the Insurance Business Regulation Law No. (12) of 2021, and shall be effective from 15/9/2024.Article (2): Definitionsa- The words and phrases contained in these instructions shall have the meanings assigned to them below, unless the context or indication requires otherwise:The Law: Insurance Business Regulation Law No. 12 of 2021.The Profession: The profession of certified public accounting related to audit services in accordance with the provisions of the effective Law Regulating the Accounting Profession and the regulations, instructions, and decisions issued thereunder.Audit Firm: The office or company through which the certified public accountant practices the profession, registered with the Companies Registrar at the Ministry of Industry, Trade and Supply to practice the profession in accordance with effective legislation.Engagement Partner: The licensed external certified public accountant in the audit firm responsible for the audit service and the report issued on behalf of the audit firm.Audit Service: Examination of the accounts and financial statements of the insurance company to express an opinion or conclusion thereon in accordance with International Auditing Standards.Audit Team: The team members who perform the audit service procedures under the supervision of the Engagement Partner.Additional Services: Any other services provided by the audit firm to the insurance company other than the audit service.Page 2 of 9---b- For the purposes of these instructions, the definitions contained in the Law, the effective Companies Law, and the effective Law Regulating the Certified Public Accounting Profession, and the regulations and instructions issued thereunder, shall be adopted wherever they appear in their provisions, unless the context indicates otherwise.Article (3): Audit Service PolicyThe insurance company shall prepare an audit service policy and have it approved by the company's Board of Directors, provided that it is reviewed at least annually and amended whenever necessary, and shall include, at a minimum, the following:a- The mechanism for nominating and electing the audit firm, which shall include, at a minimum, the conditions and requirements stated in Article (4) of these instructions.b- The mechanism for determining audit fees.c- Periodic change of the audit firm and audit team.d- Conditions for the independence of the external certified public accountant, which shall include, at a minimum, the conditions stipulated in Article (5) of these instructions.e- Duties and responsibilities of the audit firm and the Engagement Partner.f- The relationship of the Audit Committee with the audit firm and audit team.g- Additional services that the audit firm may be assigned.h- Criteria for selecting the audit firm and the Engagement Partner, which shall consider, at a minimum, the following:1- Audit Firm:a- The number of Engagement Partners in the firm shall not be less than two partners.b- The firm or the external entity to which the firm belongs shall have appropriate experience of no less than (5) years in providing audit services for insurance companies, or the Engagement Partner in the firm shall meet the provisions of sub-paragraph (w) of paragraph (2) of sub-paragraph (h) of Article (3) of these instructions.Page 3 of 9---c- The firm shall have an actuary licensed by the Central Bank or possess the qualifications and experience as required or stipulated by the legislation regulating the licensing of actuaries issued by the Central Bank, for the purpose of studying and evaluating the opinion of the actuary appointed by the insurance company regarding the company's financial statements.d- The firm shall have one or more information technology auditors with knowledge and experience in auditing information technology systems.2- Engagement Partner:a- Shall be of good conduct and behavior and enjoy a good professional reputation.b- Shall not have been convicted of a felony or misdemeanor affecting honor or trust.c- Shall hold a valid license to practice the profession and be registered in the register of Jordanian Certified Public Accountants in accordance with the provisions of the effective Law Regulating the Certified Public Accounting Profession and the System for Practicing the Certified Public Accounting Profession.d- Shall not have been prohibited from practicing the profession during the last five years or had a final criminal judgment issued against him as a result of committing a professional error or a legal violation related to practicing the profession.e- Shall hold at least a first university degree in accounting or any related specialization.f- The required experience and knowledge for providing audit services to insurance companies shall include the following:1- Shall have practical experience in practicing the profession for a period of no less than (10) years, including at least (5) years in providing audit services for insurance companies.2- Shall be familiar with insurance business and its risks, the effective Insurance Business Regulation Law, and the regulations, instructions, and decisions issued thereunder, and any other related legislation.Page 4 of 9---g- Notwithstanding what is stated in sub-paragraph (w) of this paragraph, the required experience and knowledge for providing audit services to Takaful insurance companies shall include the following:1- Shall have at least two years of experience in providing audit services for Takaful insurance companies within the total required experience.2- Shall be familiar with Takaful insurance companies' business and risks, all relevant legislation regulating Takaful insurance companies' business, and the accounting and auditing standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the standards of Islamic financial councils.Article (4): Nomination and Election of the Audit Firm1- Notwithstanding related effective legislation, the insurance company shall, when nominating and electing an audit firm to provide audit services, adhere to the following:a- The audit firm shall not have been elected for more than seven consecutive financial years as a maximum.b- The Governor may extend the period stated in sub-paragraph (1) of this paragraph for assigning the same audit firm or the group to which the audit firm providing audit services to the parent company belongs, for a maximum of three additional financial years to provide audit services to the company operating in the Kingdom, whether it is a branch of a foreign insurance company or part of a group.b- If the periods stipulated in paragraph (a) of this Article have expired, the same firm may not be re-elected again before at least three financial years have passed from the date of its last election by the insurance company.c- The same audit firm or the group to which the audit firm belongs shall be elected for audit services for the foreign branches of the insurance company and its subsidiaries inside and outside the Kingdom, unless this conflicts with the effective legislationPage 5 of 9---in the country where the branch or subsidiary operates, or if it is not possible, provided that the Central Bank is informed immediately upon making the nomination decision.d- The audit firm shall be appointed for one financial year, taking into account the following:1- The audit firm shall not be changed during the contract period except after obtaining prior approval from the Central Bank and based on substantial reasons.2- The term of the Engagement Partner in providing audit services to the insurance company shall not exceed (4) consecutive financial years, starting from the date of their first appointment, and the Engagement Partner whose term for audit services specified in this period has expired may not be re-assigned again before at least two years have passed from the date of their last assignment.2- The Audit Committee shall adhere to the following:a- Verify the qualifications and effectiveness of the external certified public accountant and ensure that the engagement letter clearly includes the scope of the audit, fees, contract period, and any other conditions, in a manner commensurate with the nature of the insurance company, the size of its operations, the complexity of its operations, and its risks.b- Verify the external certified public accountant's written disclosure of their commitment to these instructions, in application of the provisions of Paragraph (a) of Article (32) of the Law.Article (5): Independence and Objectivity of the Audit Firm and TeamWithout prejudice to the provisions of Paragraph (a) of Article (22) of the Law:1- The Audit Committee shall monitor the independence and objectivity of the audit firm, the Engagement Partner, and the audit team members upon contracting with them and throughout the contract period, ensuring that there is no conflict of interest between the insurance company and the external certified public accountant.2- The Board of Directors of the insurance company shall ensure what is stated in Paragraph (1) of this Article, and verify that the engagement letter, upon contracting with the external certified public accountant, includes the following conditions at a minimum:Page 6 of 9---a- The audit firm, the Engagement Partner, or any of the audit team members shall not hold the chairmanship of the Board of Directors of the insurance company or be a member of the company's Board of Directors or a member of the Board of Directors or Board of Managers of any of its subsidiaries.b- The audit firm, the Engagement Partner, or any of the audit team members shall not perform any technical, administrative, or consulting work for the insurance company or any of its subsidiaries during the audit assignment.c- The audit firm, the Engagement Partner, or any of the audit team members shall not be a partner with any of the members of the Board of Directors or Board of Managers or senior executive management of the insurance company or any of the members of the Board of Directors or Board of Managers or senior executive management of any of the insurance company's subsidiaries, or an agent for any of them, or an employee thereof.d- There shall be no kinship up to the second degree between the Engagement Partner or any member of the audit team and any member of the Board or Board of Managers or senior executive management of the insurance company or any of its subsidiaries.e- The audit firm, the Engagement Partner, or any of the audit team members shall not own, deal in, or speculate in the shares of the insurance company or the shares of any of the insurance company's subsidiaries, either directly or indirectly.f- The Engagement Partner or any of the audit team members shall not combine audit services for the insurance company with any additional services that the audit firm had been assigned by the insurance company and for which it had provided its advisory opinion.Article (6): Additional ServicesAdditional services provided by the external certified public accountant outside the scope of audit services include, but are not limited to:Page 7 of 9---1- Evaluating the extent of the insurance company's compliance with the provisions of effective legislation for combating money laundering and terrorist financing and the adequacy of the company's policy and procedures related thereto, provided that the insurance company shall attach the external certified public accountant's certificate related to combating money laundering and terrorist financing with the company's final financial statements in accordance with the form approved by a decision of the Governor for this purpose.2- Evaluating the extent to which the reinsurance programs undertaken by the insurance company comply with the provisions of the effective reinsurance standards instructions and the provisions of the Law and the regulations, instructions, and decisions issued thereunder, provided that the insurance company shall attach the external certified public accountant's certificate related to reinsurance programs with the company's final financial statements in accordance with the forms approved by a decision of the Governor for this purpose, as appropriate.Article (7): General Provisionsa- The insurance company shall inform the audit firm of these instructions within a maximum period of two weeks from their effective date.b- The Central Bank may meet with the external certified public accountant of the insurance company and request any information or data related to the audit assignment for that company.c- The provisions of Paragraph (a) and Paragraph (d) of Sub-paragraph (1) of Article (4) of these instructions shall apply when the insurance company elects the external certified public accountant at the General Assembly meeting of the year 2024.Article (8): DecisionsThe Governor shall issue the necessary decisions to implement the provisions of these instructions.Page 8 of 9---Article (9): RepealInstructions on the Conditions to be Met by the External Auditor for Insurance Companies and the Scope of Their Work and Duties No. (5) of 2022 and its amendments are hereby repealed.Chairman of the Central Bank Board of DirectorsPage 9 of 9