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Setting out to improve plan audits and decrease deficiencies discovered by the Department of Labor, the American Institute of Certified Public Accountants’ (AICPA) Board recently voted to issue a new auditing standard to address auditors’ responsibility in forming an opinion and reporting on benefit plan audits.
Applicable only to those plans subject to the Employee Retirement Income Security Act (ERISA) of 1974, the new standard, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, includes new requirements for:
Pending issuance by the Board, which is anticipated in the first half of 2019, the standard will be effective for those applicable financial statements with periods ending on or after Dec. 15, 2020.
If the new standard is passed, there will be some changes you see in your audit process going forward. Outlined below are six changes you can expect to see:
1. The nomenclature related to limited scope audits is changing. Gone will be the days of asking your auditor for a ‘limited scope audit’. Going forward, the new standard imposes a mouthful of a name change to an ‘ERISA section 103(a)(3)(C) audit.’
2. Before your employee benefit plan audit begins, your plan management must provide written acknowledgement to the auditor indicating an understanding of its responsibilities. These responsibilities include, but are not limited to:
3. Your financial statement opinion will take on a new extended length with additional verbiage intended to provide better insight to the reader as to the responsibilities of plan management, as well as the auditor, to clarify what is being opined upon and what is not.
4. Additional required procedures will be performed by your auditor in the planning and execution stages of the plan audit, as well as with regard to reporting of any ‘noncompliance findings’ to plan management on a timely basis.
5. Your Form 5500 will need to be provided to your auditor in final or near-final form for review prior to issuance of the financial statement opinion.
6. Expect to see changes to the engagement letter and the representation letter related to all the items above. Plan management should carefully review the content of these letters.
Stay tuned as we keep you up-to-date on the potential new standards. In the meantime, should you have any questions, contact our employee benefit plan auditors today.
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