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  • Section (6) Regulations Pertinent to the Principles of Organizing Accounting Books and Records of Each of the Takaful Operators, Agents and Brokers and Determining Data to be maintained in these Books and Records

    • Article (1) – Types of Accounting Books

      1. Following types of accounting books shall be maintained at minimum:

        a) Accounting Books for participants including Technical accounting books;

        b) Accounting books for shareholders;

        c) Wakala and Mudaraba fee accounting books;

        d) Ledgers and sub-ledgers for participants and shareholders;

        e) Journals for participants and shareholders;

        f) Adequate accounting and other books to identify and support the contracts and the assets, liabilities, revenues and expenses attributable to its operations; and

        g) Any other books as required by the Authority.
         
      2. The Company which is carrying on both Takaful Insurance of Persons & Fund Accumulation operations and Property and Liability Takaful insurance operations must maintain separate books in respect of both operations. Transactions relating to each business operation must be maintained separately. The Company must maintain accounting and technical books needed to identify all assets and liabilities relating to the business operations.
         
      3. The Company shall maintain separate accounts for shareholders and participants.
         
      4. The Authority may from time to time inspect under conditions of secrecy the books, accounts and transactions of any Company and of any of its branch offices.
         
      5. The Company should submit any documents or information requested by the Authority on any Company that has an ownership relationship with the Company, pertaining to the Company’s books and within the time period that is set by the Authority.
         
      6. The Company shall maintain backup for all records. The backup shall be maintained in a separate location from the original records.
         
      7. Regardless of any information mentioned in other instructions, the electronic information or information generated from the computer system, telefax, fax and e¬mail are considered adequate and valid if the authoritative controls were adhered to.
         
      8. The books referred to above shall be in the form of originals, or in any other form of electronic archiving systems.
         
      9. The Authority may assign an employee(s) from their end or appoint an external party to inspect, at appropriate times, the books of the Company. The Company shall have all its books available and cooperate with the employee(s) or the external party so that they can fully perform their duties. The Company shall bear all the expenses for the external party as decided by the Authority, unless the Authority deems otherwise.
         
      10. For inspection purposes, the Company shall allow the Authority access to its books, accounts and documents and shall give such information and facilities as may be required to conduct the inspection.
         
      11. The retention period of the books and backups along with any other related documents and data, should be for ten (10) years or more, as of the end of the financial year or as of the end date of the activity or the working relation with the participants.
         
      12. The Company will maintain books beyond the normal statute of limitation periods as in paragraph (11), when the books are subject to ongoing investigations or prosecution in court, until such books are no longer needed.

    • Article (2) – Records for Agents

      1. Every insurance agent shall prepare for every accounting year the following:

        a) A financial position as at the end of each accounting period;
        b) An income statement for that period;
        c) A cash flow statement;
        d) A change in equity statement; and
        e) Additional statements and notes to accounts as may be required by the Authority.
         
      2. Every insurance agent shall maintain separate ledger accounts for each of its clients.
         
      3. The retention period for records identified in this Article and their backup copies shall be in line with the applicable insurance agent’s regulations.
         
      4. The agent shall maintain records beyond the normal statute of limitation periods as stipulated in the applicable insurance agent’s regulations, when the records are subject to ongoing investigations or prosecution in court, until such records are no longer needed.
         
      5. The Authority may assign an employee(s) from their end or appoint an external party to inspect, at appropriate times, the records of the agent. The agent shall have all his records available and cooperate with the employee(s) or the external party so that they can fully perform their duties. The agent shall bear all the expenses for the external party as decided by the Authority, unless the Authority deems otherwise.

    • Article (3) – Records for Brokers

      Insurance brokers shall maintain accounting and technical books and prepare the financial statements in accordance with the terms and provisions identified in the insurance brokerage regulations and decisions issued pursuant thereto.

    • Article (4) – Auditing of Accounting Books

      1. The Company shall appoint one or more qualified and experienced External Auditors for its accounts for every financial year.
         
      2. If a Company fails to appoint an External Auditor within four months from the beginning of the financial year, the Authority shall appoint such External Auditor at the Company’s expense.
         
      3. The External Auditor shall review actuarial reports that represent immediate or future risks facing the Company, and the Authority shall be provided with copies of these reports in a timely manner.
         
      4. The Actuary shall, in the presence of immediate or future risks facing the Company that would hinder the Company from fulfilling its short term and long term liabilities, submit a report on a timely basis directly to the Company’s Board of Directors. The Board of Directors shall examine the report and recommend corrective actions, and forward all related information to the Authority including the Board of Director’s recommendations related to the report.
         
      5. The Company’s Board of Directors shall form an Audit Committee consisting of at least three members from non-executive managers (a Chairman and two other members), of whom a member shall be an expert in financial and accounting affairs. The Board of Directors shall select the committee members among its members other than the members of the executive management or any of the committees established by the Board of Directors. One or more members from outside the Company may be appointed in case the number of non-executive Board of Directors members is not sufficient. The Audit Committee shall meet at least once every three months, or whenever necessary.
         
      6. The Company shall:

        a) Establish an Internal Audit department, which shall report directly to the Audit Committee. The Internal Audit Head in charge of this department must be a holder of a professional certificate in the related discipline and have relevant and adequate experience.

        b) Appoint a regulatory compliance officer. This officer shall verify compliance with all rules, regulations and instructions. This officer shall directly report to the Chief Executive Officer and shall contact the Authority directly and provide it with information according to the procedures that it specifies.
         
      7. The Company shall submit to the Authority the management letter issued by the External Auditor, on an annual basis, before publication of the financial statements.
         
      8. Further guidance on auditing of accounting books and other related guidelines in Addendums (1) and (2) of the regulations herein shall be applied.

    • Article (5) – Addendums

      The Addendums attached to these regulations are an integral part of the regulations and are to be read along with the regulations.

      • Addendums to Section 6 Principles of Organizing Accounting Books and Records of Each of the Takaful Operators, Agents and Brokers and Determining Data to be maintained in these Books and Records

        • Addendum (1)

          1. Additional Tasks for the External Auditor:
            a) The Authority may request additional duties from the External Auditor, including:
             
            1. 1) Submission of such additional information relating to the audited accounts as the Authority may specify;

            2. 2) Enlarging the scope of the audit;

            3. 3) Notifying the Authority of any financial violations discovered during the course of the audit;

            4. 4) Notifying the Authority of any reservations regarding the accounts or the reserves of the Company;

            5. 5) Notifying the Authority of any discrepancy in the financial systems, controls, and of any material inaccuracies or inconsistency in the Company’s financial statements; and

            6. 6) Preparing such financial reports and statements as required by the Authority. External Auditor's fees for such additional tasks shall be borne by the Company.

            b) While carrying out such additional duties, listed in paragraph (a), as requested by the Authority, the External Auditor shall not be in breach of any duties towards the Company, the Authority, the shareholders or any third parties.
             
          2. The External Auditor shall be independent and shall not be the Chairman or a director in the Company’s Board of Directors or a managing director, agent, representative or taking up any administrative work therein, or supervising its accounts, or a next of kin to someone who is responsible for the administration or accounts of the Company, or having an extraordinary interest in the Company or any of its competitors.
             
          3. If any of the circumstances referred to in the paragraph (2) occurs after the appointment of the External Auditor, the Company must appoint another External Auditor.
             
          4. The Company shall provide the External Auditor with all information and assistance necessary for carrying out his duties.
             
          5. The duties of the External Auditor shall include the preparation of a report on the final and interim accounts. The report shall contain a statement on whether the Company's accounts are fairly stated and reflect materially, the actual state of affairs of the Company and whether the Company has provided the External Auditor with all required information and clarifications.
             
          6. If the Company is a foreign Company, its final audited accounts together with the External Auditor's report shall be sent to its main office abroad and a copy shall be sent to the Authority.
             
          7. External Auditor Access to Relevant Information: Outsourcing agreements must ensure that the Company’s Internal and External Auditors have timely access to any relevant information they may require to fulfill their responsibilities.

        • Addendum (2)

          1. Major Roles and Responsibilities of the Internal Auditor:

            a) Evaluates and provides reasonable assurance that risk management, control, and governance are functioning as intended for all required systems, processes and/or risks enabling the Company to meet its objectives and goals;

            b) Reports risk management issues and internal control deficiencies identified directly to the Audit Committee, or equivalent group-level governance structure for Foreign Companies, and provides recommendations for improving the Company’s operations, in terms of both efficient and effective performance;

            c) Evaluating the risk exposures relating to the achievement of the Company’s objectives;

            d) Evaluating the reliability and integrity of information and the means used to identify, measure, classify and report such information;

            e) Evaluating the information security and probabilities of exposure to its related risks.

            f) Evaluates regulatory compliance program with consultation from legal counsel;

            g) Evaluates the Company’s readiness in case of business interruption; and

            h) Teams with other internal and external resources as appropriate.
             
          2. The Company shall have an annual audit plan and a risk assessment performed annually and aligned to the annual audit master plan.