New Audit Standards Retirement Plan Audits | 401k Audit Cincinnati

Board Proposes New Auditing Standards for ERISA Plan Audits

Published on by Joe Conover in Benefit Plan Audits

Board Proposes New Auditing Standards for ERISA Plan Audits

On April 20, 2017, the AICPA Auditing Standards Board issued an exposure draft, Proposed Statement on Auditing Standards (SAS), Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA. This proposed SAS is specific to employee benefit plan financial statement audits which are subject to the Employee Retirement Income Security Act of 1974 (ERISA). These proposed changes are in response to the U.S. Department of Labor’s (DOL) request for a review of the auditor reporting model for ERISA plan audits including providing better insight to the public regarding the scope of the responsibilities of management and the auditor.

As some may recall, the Employee Benefits Security Administration (EBSA) of the DOL issued a report in 2015 detailing its review of audit quality, titled Assessing the Quality of Employee Benefit Plan Audits. The EBSA found that of the audits reviewed had one or more major deficiencies with respect to at least one relevant requirement of Generally Accepted Auditing Standards (GAAS). The EBSA also found that 17% of the auditor’s reports reviewed in their study failed to comply with one or more of ERISA’s reporting and disclosure requirements. This proposed SAS is intended to reduce these audit failure rates.

The proposed SAS includes changes to the form and content of the auditor’s report and, more importantly, new reporting requirements on findings from procedures performed on specific plan provisions relating to the financial statements. These findings can either be included in the audit report or issued as a separate report.

Below are some of the more significant proposed changes:

  • Additional engagement acceptance requirements
  • New performance requirements that serve as a basis for a new reporting requirement, Report on Specific Plan Provisions Relating to the Financial Statements
  • New required procedures when the ERISA-permitted audit scope limitation is imposed
  • Additional written management representations
  • Considerations relating to the Form 5500 filing, which the auditor’s report accompanies
  • Expanded description of management’s responsibilities
  • Expanded communication on the ERISA supplemental schedules
  • New form and content requirements of the auditor’s report when management instructs the auditor to limit the scope of the audit, as permitted by ERISA, including expanded auditor’s responsibilities relating to the certified information
  • Required emphasis-of-matter paragraphs

For plan sponsors the biggest impact will come from the additional management representations required as well as potential increases in audit costs as a result of possible additional procedures specific to certain areas that would be required irrespective of the risk of material misstatement.

The ASB is requesting public comments from all parties affected by August 21, 2017.  The ASB will review the public comments before making these changes final. The proposed SAS would be effective for audits of financial statements for periods ending on or after December 15, 2018.

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If your audit will be affected by these proposed changes, have us contact you to see how we can provide a quality audit that meets the requirements of all regulatory agencies and lets your employees know their assets are secure.


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