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Key concerns for worker profit plan audits

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In July 2019, the Auditing Requirements Board issued its Assertion on Auditing Requirements 136, “Forming an Opinion and Reporting on Monetary Statements of Worker Profit Plans Topic to ERISA.” SAS 136 revamps the audit necessities for worker profit plans topic to ERISA and is efficient for plan monetary statements for intervals ending on or after Dec. 15, 2021. 

Beneath SAS 136, what was beforehand often called a restricted scope audit will now be referred to as an ERISA Part 103(a)(3)(C) audit. There are vital modifications within the audit and so they usually deal with elevated auditor and administration accountability. Elevated auditor accountability is critical to extend the standard of the audits and the integrity of the career. Elevated administration accountability is important to rising plan compliance. 

  • Auditor accountability. It’s outdated information that Division of Labor inspections have indicated that accounting corporations that don’t specialise in worker profit plan audits have considerably increased deficiency charges than specialist corporations. A standard response from these corporations is that EBP audits are “not actual audits” and “It’s only a disclaimer of opinion.” Years of elevated scrutiny from the DOL, peer reviewers, and enhanced oversight have introduced the variety of EBP auditors down from 7,330 in 2011 to 4,557 in 2019 (down 38%), however the core of the issue stays — many auditors don’t perceive the dangers of the audit. SAS 136 has a number of modifications that clearly clarify that these are, in reality, actual audits, and that the auditor has a big quantity of accountability to carry out the audit in accordance with skilled requirements.
  • Administration accountability. Administration typically assumes that “The belief firm takes care of every thing.” Any actual EBP auditor is aware of that administration has a big quantity of accountability over the plan and a scarcity of oversight of the plan typically results in noncompliance. When plan administration doesn’t administer the plan accurately, contributors may be harmed, and the audit may be arduous. SAS 136 has included a number of modifications to make clear administration’s accountability because it pertains to EBP-specific issues and ensures that the auditor is conscious of it as nicely. 

SAS 136 has quite a few modifications. Under are a couple of key areas to remember, associated to each auditor and administration accountability, as you audit your Dec. 31, 2021, year-end plans. SAS 136 has many different sides that you need to take into account in your audits, together with communication with administration and people charged with governance (“TCWG”), figuring out and speaking reportable findings to TCWG, definitive language on modifications to threat evaluation, planning and area work, overview of the draft Kind 5500, and others. Corporations ought to take correct persevering with skilled training and improve their time budgets to make sure sufficient time is allotted to adjust to the brand new normal. 

Auditor’s report — opinion 

The most important change, by far, is that the auditor will not concern a disclaimer of opinion on the monetary statements and supplemental schedule of their report, however as a substitute will concern a report with a two-pronged opinion for each the monetary statements and supplemental schedules as follows.

For the monetary statements, the auditor will opine on whether or not:

  • The quantities and disclosures within the monetary statements not coated by the certification are introduced pretty, in all materials respects, in accordance with the relevant monetary reporting framework.
  • The licensed funding info within the monetary statements agrees to or is derived from, in all materials respects, the certification.

For the supplemental schedule, the auditor will opine on whether or not:

  • The shape and content material of the supplemental schedules, aside from the knowledge within the supplemental schedules that agreed to or is derived from the licensed funding info, are introduced, in all materials respects, in conformity with the Division of Labor’s guidelines and laws for reporting and disclosure below ERISA.
  • The data within the supplemental schedules associated to property held by and licensed to by a professional establishment agrees to, or is derived from, in all materials respects, the knowledge ready and licensed by an establishment that administration decided meets the necessities of ERISA Part 103(a)(3)(C).

Auditor’s report — Administration accountability 

The administration’s accountability part of the brand new auditor’s report contains an extra paragraph with language to element administration’s accountability for EBP-specific issues, similar to administration’s accountability for administering the plan; sustaining a present plan instrument, together with all plan amendments; figuring out that the plan’s transactions which might be introduced and disclosed within the monetary statements are in conformity with the plan’s provisions, together with sustaining enough data with respect to every of the contributors, to find out the advantages due or which can change into because of such contributors; and others. 

As well as, this part of the report contains an express assertion to make clear that administration’s election of an ERISA Part 103(a)(3)(C) audit doesn’t have an effect on administration’s accountability for the monetary statements.

Engagement acceptance 

SAS 136 expands on engagement acceptance auditing requirements to state that administration should decide in writing that:

  • It acknowledges and understands its duties for the EBP-specific issues famous within the previous paragraph; 
  • That an ERISA Part 103(a)(3)(C) audit is permissible below the circumstances;
  • That funding info is ready and licensed by a professional establishment as described in 29 CFR 2520.103-8, and the certification meets the necessities in 29 CFR 24520.103-5;
  • That the licensed funding info is appropriately measured, introduced and disclosed in accordance with the relevant monetary reporting framework; and,
  • That it should present the auditor with a considerably full 5500 previous to the date of the auditor’s report. 

The auditor can accomplish these duties by means of the engagement letter.  

Additionally, the auditor should inquire with administration on how administration decided that the entity getting ready and certifying the funding info is a professional establishment below DOL guidelines and laws and doc these inquiries. 

Administration representations

The auditor is required to acquire extra representations from administration on the conclusion of the audit. Administration should make representations relating to the extra duties of administration and the election of an ERISA 103(a)(3)(c) audit for objects mentioned within the previous paragraph administration duties and engagement acceptance paragraphs. 


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