Last month, we issued a new statement on auditing standards (SAS) for employee benefit plan audits, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA. The SAS is designed to make the auditor’s report easier to understand and more relevant, leading to improved EBP audit quality.
If you perform financial statement audits of EBPs subject to ERISA, you’ll want to carefully review the changes and start planning for implementation well before the effective date
Here’s some advice to get you started.
Step 1: Become familiar with the top 5 key changes.
1. A new AU-C section 703, Forming an Opinion and Reporting on ERISA Plan Financial Statements, replacing AU-C section 700 for ERISA plans.
Keep in mind that the standard is not all-inclusive. When performing an ERISA audit, all the AU-C sections apply, except when specifically noted in the standard.
2.The standard addresses requirements specific to:
- ERISA plans for engagement acceptance
- Audit risk assessment and response (including the auditor’s consideration of relevant plan provisions)
- Communications of reportable findings with those charged with governance
- The auditor’s responsibilities relating to the ERISA-required supplemental schedules and the Form 5500
3. The form and content of the auditor’s report for ERISA plans have changed.
4. For ERISA plan audits (formerly called full-scope reports), the auditor’s report is aligned with SAS No. 134, requiring the opinion section to be placed first, followed by the basis for opinion section.
This new report also includes an enhanced management responsibilities section specific to ERISA plans. It requires the auditor to include a statement about whether, in the auditor’s opinion, the form and content of the information in ERISA-required supplemental schedules conform with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under ERISA.
5. There’s a new form of report called the ERISA Section 103(a)(3)(C) report (previously called the limited-scope report). In it, the scope and nature section is required to be placed first, followed by a new two-part opinion and a new basis for opinion section, along with enhanced management and auditor’s responsibilities sections.
The ERISA Section 103(a)(3)(C) report also includes specific reporting on the ERISA-required supplemental schedules.
For more information on these and other changes, check out our at-a-glance summary [PDF].
Step 2: Know when the standard must be implemented.
The standard is effective for audits of ERISA plan financial statements for periods ending on or after Dec. 15, 2020.
Early adoption is not permitted, but you’ll want to connect with your clients well before the effective date.
Step 3: Consider how the standard will affect what you do.
It’s not too early to start planning for implementation. You’ll want to review your firm’s methodologies and guidance and update them accordingly. Consider the training needs of your engagement teams and start educating identified users about the new form and content of the auditor’s report.
Don’t forget to also look into the effects of the amendments on other AU-C sections, not only in this standard but also those included in the auditor reporting standard (SAS No. 134) and omnibus standard (SAS No. 135).
We’re here to help you along the way. Visit our auditing standards hub for the latest information and helpful resources.
Linda Delahanty, CPA, Senior Manager — Audit & Attest Standards, Association of International Certified Professional Accountants
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Originally published by AICPA.org