Law on Compulsory Insurance of Auditors

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Important: the file was posted on the site earlier and may not take later changes into account. Before applying its provisions, check the current version of the law in the "Adilet" legal information system (adilet.zan.kz).

Purpose of the law

The Law of the Republic of Kazakhstan on compulsory civil liability insurance of audit organizations establishes the legal, economic and organizational foundations of this type of compulsory insurance. Its purpose is to protect, by means of insurance payments, the property interests of persons who may suffer harm as a result of audit activity.

An auditor's report is relied upon by owners, investors, banks, government bodies and counterparties. If an audit was carried out with violations and the report turned out to be unreliable, decisions that caused losses may be taken on the basis of it. Compulsory insurance gives the injured party a source of compensation that does not depend on the current financial position of the audit organization.

Who it applies to

  • audit organizations — act as policyholders and must have a valid compulsory insurance contract when carrying out audit activity;
  • insurance organizations — those holding a licence for the relevant class of compulsory insurance;
  • third parties — audit clients and other persons who have suffered property damage act as beneficiaries;
  • authorized state bodies — supervise compliance with the requirements of the law.

Object of insurance and insured event

The object of insurance is the property interest of the audit organization connected with its obligation to compensate harm caused to third parties in the course of audit activity. An insured event is the occurrence of civil liability of the audit organization, that is, an established obligation to compensate harm caused as a result of violations in carrying out an audit.

The procedure for establishing this obligation, the list of documents, the amount of the sum insured, and the deadlines for notification and payment are determined by the law and the contract — they should be checked against the current version.

Main obligations and rights of the parties

Audit organization

  • conclude a compulsory insurance contract and renew it on time;
  • provide the insurer with accurate information when concluding the contract;
  • notify the insurer of claims made and of circumstances that may lead to an insured event;
  • provide the documents needed to establish the causes and the amount of harm.

Insurance organization

  • issue an insurance policy and familiarize the policyholder with the terms of insurance;
  • consider the application for an insurance payment within the prescribed deadlines;
  • make the payment within the sum insured or send a reasoned refusal;
  • in cases provided for by law, bring a recourse claim against the responsible person after payment.

Beneficiary

The person who has suffered harm is entitled to apply to the insurer for compensation, submitting documents confirming the fact of harm, its amount and its connection with the audit activity.

What matters in practice

  • Check that the policy period covers the entire period during which audits are carried out, and not just the date the contract with the client was signed.
  • Study the exclusions: intentional acts, harm unrelated to audit activity, and other circumstances provided for by the law and the contract.
  • The sum insured under a compulsory contract may be insufficient for large clients — in such cases voluntary liability insurance above the compulsory cover is considered.
  • Keep the audit working papers: they serve as the main evidence when a claim is examined.
  • The absence of the compulsory policy entails liability provided for by the legislation on administrative offences.

Frequently asked questions

Can the cost of the policy be calculated in advance?

A preliminary estimate can be obtained in the auditors' liability insurance calculator. The final premium is determined by the insurance company based on the data in the application.

How does voluntary insurance differ from compulsory insurance?

The terms of compulsory insurance are set by law, while a voluntary contract allows a higher limit and additional costs to be agreed, for example legal defence. For more details, see the liability insurance section.

Does the policy reimburse fines imposed on the audit organization?

As a rule, no. Compulsory insurance is aimed at compensating harm to third parties, not at covering administrative sanctions.

To compare insurers' offers for this type of insurance, you can get a consultation.