Significant Changes Proposed to Benefit Plan Audit Reporting
More than two years after it began its project, the AICPA Auditing Standards Board (ASB) issued Proposed Statement on Auditing Standards (SAS), Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA.
In January 2015, a special task force of the ASB was formed to consider a proposal to improve the quality of employee benefit plan (EBP) audits by strengthening the EBP auditor’s report. The Employee Benefits Security Administration (EBSA) of the Department of Labor issued a report in May 2015, Assessing the Quality of Employee Benefit Plan Audits. The EBSA found that 39% of the audits reviewed had one or more major deficiencies with respect to one or more relevant requirements of generally accepted auditing standards. 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. The Proposed SAS reflects the ASB’s consideration of whether audit quality could be enhanced by a new reporting model for EBPs.
Highlights of the Proposed SAS are:
- Changes to the form and content of the auditor’s report for limited scope audits
- Requirements to report findings from procedures performed on specific plan provisions relating to the financial statements
- Expanded requirement for written representations from management
The proposed changes would likely require auditors to perform more work in certain areas, and include findings on compliance with specific plan provisions in the auditor’s report. The auditor’s report is electronically filed with the Form 5500 and is accessible via an online database to regulators, plan participants, and the public.
The proposed SAS would be effective for audits of financial statements for periods ending on or after December 15, 2018. The Explanatory Memorandum includes nine Issues for Consideration for which feedback from respondents is specifically requested. Comments are due to the ASB by August 21, 2017.