LAW OF THE AZERBAIJAN REPUBLIC

of May 22, 2007 No. 333-IIIQ

About compulsory insurance of professional responsibility of the auditor

This Law governs the relations on compulsory insurance of professional responsibility of the physical persons and legal entities rendering auditor services in the territory of the Azerbaijan Republic before subjects of audit, and determines their organizational, legal and economic basis.

Article 1. Basic concepts

The concepts used in this Law have the following values:

1.1. the auditor - the physical person or legal entity rendering in the procedure established by the legislation auditor services in the territory of the Azerbaijan Republic;

1.2. the subject of audit - the physical person or legal entity which signed the contract with the auditor on carrying out audit;

1.3. object of compulsory insurance of professional responsibility of the auditor - responsibility for the harm done to the subject of audit as a result of rendering services by the auditor;

1.4. professional responsibility of the auditor - the obligation of the auditor to compensate the harm done to the subject of audit as a result of rendering auditor services;

1.5. the insurer - the legal entity created for the purpose of implementation only of activities for insurance and reinsurance and who got special permission (license) in the procedure established by the legislation;

1.6. insurer - the physical person or legal entity which is rendering auditor services in the procedure established by the legislation, signed the agreement on insurance of the professional responsibility with the insurer;

1.7. insured event - the case which is under the agreement of compulsory insurance of professional responsibility of the auditor the basis for implementation of insurance payments to the insurer;

1.8. insurance premium - the sum of money which is subject to payment by the insurer to the insurer according to the agreement of compulsory insurance of professional responsibility of the auditor (further - the insurance contract);

1.9. insurance sum - extreme limit of the insurer liability on indemnification, the audit caused to the subject as a result of rendering auditor services;

1.10. insurance indemnity - the sum of money in the amount of insurance sum which is subject to payment to the insurer by the insurer in case of loss occurrence.

Article 2. Legislation on compulsory insurance of professional responsibility of the auditor

2.1. The legislation on compulsory insurance of professional responsibility of the auditor consists of this Law, the Civil code of the Azerbaijan Republic, the Laws of the Azerbaijan Republic "About insurance activity", "About compulsory insurance", "About auditing service", "About the Central bank of the Azerbaijan Republic" and other regulatory legal acts.

2.2. In case of contradictions between this Law and international treaties which participant is the Azerbaijan Republic regulations of international treaties are applied.

2.3. The relations in the sphere of compulsory insurance of professional responsibility of the auditor in the Alyatsky free economic zone are governed according to requirements of the Law of the Azerbaijan Republic "About the Alyatsky free economic zone".

Article 3. The insured events generating professional responsibility of the auditor

3.1. The insured events generating professional responsibility of the auditor are:

3.1.1. violation of requirements of regulatory legal acts, standards, the rules accepted in the field of auditing service;

3.1.2. not identification in financial and tax reports of the distorted data and mistakes;

3.1.3. non-presentation of the correct recommendations about elimination of the revealed mistakes and misstatements;

3.1.4. low-quality performance of works and (or) non-compliance with terms of their accomplishment;

3.1.5. violation of the principle of privacy.

Article 4. Release of the auditor from professional responsibility

4.1. In the following cases damnification is not considered insured event:

4.1.1. harm is done as a result of failure to carry out by the subject of audit of the obligations provided by the agreement signed between the auditor and the subject of audit;

4.1.2. the data received from the relevant state bodies and other competent parties served as the reason for making the wrong audit certificate.

Article 5. Rights and obligations of the insurer

5.1. The rights of the insurer are:

5.1.1. estimate jointly with the insurer insurance risk professional responsibility of the auditor or charge this work to the independent professional appraiser;

5.1.2. take part in dispute decision about compensation by the insurer of the audit done to the subject of harm as a result of auditor services;

5.1.3. determine the amount of the harm done as a result of insured event, receive for these data from the insurer, for the purpose of assessment of harm to visit object on which there was insured event or there is probability of its incident, to receive the documents confirming case and to invite experts in the respective areas;

5.1.4. in case of origin after the conclusion of the insurance contract of the circumstances serving as the reason of increase in insurance risk to demand from the insurer of change of terms of the contract, including in the procedure for increase in insurance premiums provided by the law;

5.1.5. in the stipulated in Article 11 these Laws cases to refuse compensation on compulsory insurance of professional responsibility.

5.2. Obligations of the insurer are:

5.2.1. get insurance premium from the insurer and grant to him the insurance certificate;

5.2.2. in case of acceptance of considerable measures in the direction of reduction of risk of loss occurrence to make upon the demand of the insurer corresponding changes to the insurance contract or to sign the new insurance contract;

5.2.3. perform insurance payments in case of loss occurrence;

5.2.4. provide to the insurer the stipulated in Article 12 these Laws of privilege;

5.2.5. not spread the classified information connected with the auditor and the subject of audit;

5.2.6. protect legitimate interests of the insurer;

5.2.7. the insurer has no right to refuse the conclusion of the contract of compulsory insurance with person which has insurance interest and addressed for insurance of the corresponding risks.

5.3. By agreement of the parties according to the legislation other rights and obligations of the insurer can be provided in the insurance contract.

Article 6. Rights and obligations of the insurer

6.1. The rights of the insurer are:

6.1.1. to independently choose the insurer;

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