The American Institute of Certified Public Accountants came out with a new Statement on Auditing Standards to improve ERISA plan audit quality and address the DOL’s findings. The SAS 136 indicates “Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA. The ERISA plan financial statements audit report is the most visible change in SAS 136. As the language will be expanded and clarified to express the auditor’s opinion more clearly, there will surely be a significant difference in the SAS 136 audit report.
Limited Scope Audits
What ERISA means when it plans sponsors to engage auditors for a so-called limited scope audit is that there is no need for the auditors to perform any auditing procedures concerning investment information certified and presented by an insurance company or a bank acting as a custodian or trustee. Instead, the auditor’s focus must be on their auditing procedures on specific participant counts and participant-level data. The disclaimer audit opinion is the term for the audit report carried out under a limited scope audits based on current auditing standards. DOL accepts this opinion. With SAS 136, there is an opportunity for a limited scope audit. However, they will not consider electing this audit type as a scope limitation.
They have changed this audit type to an ERISA Section 103(a)(3)(C0 audit from a limited scope audit. Also included in the ERISA Section 103(a)(3)(C0 audit opinion is the information on the procedures performed on both non-certified and certified information.
Plan Sponsors Impact
When it comes to some matters that directly affect the plan, placing responsibility on plan sponsors is possibly the most significant point of the new rules. It is the responsibility of the plan sponsor to ensure that the plan provider or the trustee. And talking about the certifying that the plan-level investment transactions are accurate and complete, it has become a qualified institution. The auditors have this responsibility at present. There is also the need to provide acknowledgment by the sponsor plan that the plan sponsor is responsible for:
- It provides a considerably completed Form 5500 to the auditor concerning the auditor’s review before the date they start the physical audit.
- Fairly presenting and preparing financial statements
- Providing and maintaining a current plan document
- Deciding whether the certification meets ERISA requirements and a permissible of 103(a)(3)(C) audit.
Part of the responsibilities of plan sponsors is to understand which disclosures and investments are subject to the qualified institution’s accuracy and completeness certification. They are also required to put into writing the acknowledgment that it has fulfilled all of the above responsibilities. Though these rules may be adopted earlier, it takes effect beginning after December 15, 2021. In other words, the plan audits for the 2019 plan year, which they perform during 2020, will not be affected. As such, there can be a further delay by the auditor for the new rules through 2021. The advice for the plan sponsors is to discuss with their plan custodians concerning the documentation required for the verification of their status to facilitate the new audit procedure as a qualified institution.