AICPA Previews New Standard for ERISA Plan Audits

Apr 27th 2017
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A new auditing standard proposed by the American Institute of CPAs (AICPA) is geared toward audits of financial statements of employee benefit plans that are subject to the Employee Retirement Income Security Act of 1974 (ERISA).

The exposure draft, Proposed Statement on Auditing Standards (SAS), Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, which was issued by the AICPA Auditing Standards Board (ASB) on April 20, addresses the auditor’s responsibilities to form an opinion and report on the financial statements of ERISA plans.

“The proposed SAS includes the form and content of the auditor’s report for an unmodified opinion, a new form of opinion when an ERISA-permitted audit scope limitation exists, and reporting requirements on findings from procedures performed on specific plan provisions relating to the financial statements (either included in the auditor’s report on the ERISA plan financial statements or issued as a separate report),” the exposure draft states.

For audits of ERISA plans only, the proposed standard, if issued as a final SAS, would apply in place of AU-C Section 700, Forming an Opinion and Reporting on Financial Statements, and paragraph .09 of AU-C Section 725, Supplementary Information in Relation to the Financial Statements as a Whole.

It also would include incremental requirements to AU-C Section 210, Terms of Engagement, and AU-C Section 580, Written Representations.

The proposal would apply to audits of single-employer, multiple-employer, and multiemployer plans subject to ERISA, according to the exposure draft.

The proposed standard would take effect for audits of financial statements for periods ending on or after Dec. 15, 2018.

Comments are due to the AICPA by Aug. 21 and should be submitted to Sherry Hazel.

The proposed SAS is the result of more than two years of work by a special task force of the ASB to consider a proposal seeking to improve the quality of employee benefit plan audits by bolstering the auditor’s report.

The US Department of Labor’s (DOL) chief accountant had asked the ASB to review the auditor reporting model for ERISA plan audits and provide improved public insight about the scope of responsibilities for management and the auditor. That review also was to include when management limits the audit scope, which is permitted by the DOL’s ERISA regulations.

DOL recommendations were considered as the proposed standard was developed.

In May 2015, the Employee Benefits Security Administration (EBSA) of the DOL issued an assessment of the audit quality of 400 plans performed by 232 CPA firms. EBSA found that 39 percent of the audits had one or more major deficiencies regarding requirements of Generally Accepted Auditing Standards. About a fifth (17 percent) of the auditor’s reports that were reviewed didn’t comply with one or more of ERISA’s reporting and disclosure requirements.

The task force also determined that the reporting model changes in the proposed standard would require performance measurements. Nine questions related to the proposed requirements are included in the “Issues for Consideration” section that begins on Page 9 of the exposure draft.


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