New standard for ERISA benefit plan audits released by AICPA

Earlier this month, the American Institute of Certified Public Accountants (AICPA) Auditing Standards Board voted to issue the Statement on Auditing Standards Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA (EBP SAS). The statement addresses an auditor’s responsibility when forming an opinion and reporting on audits of financial statements of employee benefit plans subject to the Employee Retirement Income Security Act of 1974 (ERISA). This new standard is subject to conforming amendments that may be necessary as a result of proposed SASs on Auditor Reporting. The Auditor Reporting SASs are expected to be issued in the first half of 2019; pending completion of the Auditor Reporting SASs, the EBP SAS is expected to be issued during that timeframe as well.

The new standard will cause significant changes to the form and content of the auditor’s report on plan financial statements as well as ERISA-required supplemental schedules. In addition, subsequent to the effective date, audits previously referred to as “limited scope audits” will be referred to as “ERISA section 103(a)(3)(C) audits.” The EBP SAS includes new performance and reporting requirements specific to those audits, and as such they will no longer be considered to have a scope limitation.

Other Highlights of the Standard
  • Form 5500 – As required by the EBP SAS, management would need to provide the auditor with a draft of Form 5500 so that the auditor may review the draft for material inconsistencies with audited ERISA plan financial statements in order to determine if either the draft or the financial statements require revision.
  • Communications with Management – The EBP SAS describes certain communications the auditor is required to make with management and/or those charged with governance, including reportable findings communicated in writing and discussions of any matters to arise during the performance of an ERISA section 103(a)(3)(C) audit.
  • Management Representations – In addition to those required by AU-C section 580, the auditor must have written management representations regarding certain of management’s responsibilities for administering the plan.
  • Engagement Acceptance Requirements – New engagement acceptance requirements from the EBP SAS will result in acknowledgement of certain management’s responsibilities within the engagement letter, including maintaining a current plan instrument, administering the plan and providing the auditor a draft Form 5500 prior to the date of the auditor’s report.
  • Performance Procedures – Management electing to have an ERISA section 103(a)(3)(C) audit would be required to provide certification of investment information prepared and certified by a qualified institution so that it may be compared to information in the ERISA plan financial statements and ERISA-required supplemental schedules.

The standard is expected to be effective no earlier than for financial statement audits for periods ending on or after December 15, 2020, with early adoption not permitted.

DHG Contacts

Ashley Smith
Partner, DHG Assurance