Contributed by Darlene Bayardo
In an effort to improve the communicative value and relevance of the auditor’s report, the AICPA’s Auditing Standards Board (ASB) has issued the exposure draft, Proposed Statement on Auditing Standards (SAS), Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA (Exposure Draft).
The Exposure Draft would considerably transform the way EBP audits are performed and reported. Significant proposed changes include, but are not limited to, the following:
- Procedures to be performed for specific plan provisions relating to financial statements areas, irrespective of the risk of material misstatement
- Requirement to report 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), other than when clearly inconsequential
- Incremental requirements regarding the engagement acceptance and written representations
- Additional procedures and considerations relating to the Form 5500 filing (as the auditor’s report is attached to such filing)
- Proposed new reporting model for audits of ERISA plans that, among other things, changes the form and content of the auditor’s report when management imposes a limitation on the scope of the audit, as permitted by ERISA (limited scope audit)
- Changes to the form and content of the auditor’s report for an unmodified opinion
- Expanded descriptions of management’s responsibilities
- Expanded reporting on the ERISA supplemental schedules
- Required emphasis-of-matter paragraphs
The proposed SAS would be codified as AU-C section 703 in AICPA Professional Standards and would apply to audits of single employer, multiple employer, and multiemployer plans subject to ERISA. It would be effective for audits of financial statements for periods ending on or after December 15, 2018.
It is highly recommended that plan sponsors, service providers and auditors provide comments directly to the ASB. The ASB identified 9 specific issues within the Exposure Draft in which feedback is requested. Comments are most helpful when they refer to specific paragraphs in the Exposure Draft, include reasons for the comments, and where appropriate, make specific suggestions for any proposed changes. It is also helpful to provide comments on areas in which the respondent is in agreement with the proposals. The comment deadline is August 21, 2017.
The Exposure Draft is available here.
This article originally appeared in BDO USA, LLP’s “EBP Commentator” blog (Spring 2017). Copyright © 2017 BDO USA, LLP. All rights reserved. www.bdo.com