Changes Coming to Future Employee Benefit Plan Audits – Ryan Taylor, Partner
In July 2019, the AICPA issued Statement on Auditing Standards (SAS) No. 136, Forming an Opinion and Report on Financial Statements of Employee Benefit Plans Subject to ERISA, which prescribed certain new performance requirements for financial statement audits of ERISA employee benefit plans and changed the form and content of the related auditor’s report. This SAS No. 136 was originally scheduled to become effective for audits of ERISA employee benefit plans for periods ending after December 15, 2020, however it has been pushed back to periods ending after December 15, 2021.
What does this mean for plan management? Well, there will be no more reference to “Limited Scope” audits anymore. Rather, these audits will now be referred to as ERISA Section 103(a)(3)(c) audits. Much simpler terminology! Auditors will no longer be issuing a disclaimer opinion due to the investment information certified by a qualified institution. The audit report will instead provide an opinion on whether the information not covered by the certification is presented fairly and will provide an opinion on whether the certified investment information contained in the financial statements agrees with or is derived from the certification.
The SAS also contains additional audit requirements, many of which are already being performed by Gardiner + Company auditors, affecting areas such as:
+ Engagement acceptance
+ Audit risk assessment and response
+ Communication with management or those charged with governance
+ Forming an opinion on plan financial statements
+ Form of the opinion
+ Considerations relating to Form 5500 filing Plan management will now be providing some additional written representations that:
+ Management has provided the auditor with the most current plan instrument, including amendments
+ Management acknowledges its responsibility for administering the plan and determining that transactions presented and disclosed in the financial statements conform with the plan’s provisions
+ Management acknowledges the election of an ERISA Section 103(a)(3)(c) audit does not affect its responsibility for the financial statements
Even though your employee benefit plan may just now be starting the audit for the 2020 plan year, and while many of these requirements are already being done on your employee benefit plan audit, you as plan management need to be aware of these changes and how they might affect the audits for 2021 and beyond. We will be sending out additional information as the year progresses to provide you additional information and guidance. As always, if you have any questions, please do not hesitate to reach out to us.