New auditing standard for employee benefit plans

In July 2019, the American Institute of Certified Public Accountants (AICPA) Auditing Standards Board (ASB) issued a final standard, Statement of Auditing Standards (SAS) NO. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA (EBP SAS). The EBP SAS prescribes certain performance requirements for an audit of financial statements of employee benefit plans subject to the Employee Retirement Income Security Act of 1974 (ERISA) and changes the form and content of the related auditor’s report.

What has changed?

• Engagement acceptance
• Audit risk assessment and response, including the auditor’s consideration of relevant plan provisions
• Communication of reportable findings with those charged with governance
• The auditor’s responsibilities relating to the ERISA - required supplemental schedules and the Form 5500
• The form and content of the related auditor’s report
• “Limited-Scope Audits” now referred to ERISA section 103(a)(3)(C) audits

ERISA section 103(a)(3)(C) permits plan management to elect to exclude from the audit certain investment information a qualified institution holds and certifies. Formerly referred to as a “limited-scope audit,” the EBP SAS refers to this type of audit as an ERISA section 103(a)(3)(C) audit. The EBP SAS does not change anything in ERISA, and therefore plan management’s ability to elect such an audit continues. The EBP SAS clarifies what is expected of the auditor, including specific procedures when performing an ERISA section 103(a)(3)(C) audit, and establishes a new form of report that provides greater transparency about the scope and nature of the audit and describes the procedures performed on the certified investment information.

Effective date and adoption

The EBP SAS will be effective for audits of ERISA plan financial statements for periods ending on or after Dec. 15, 2020. The EBP SAS prohibits early adoption.

For more information on this topic, or to learn how Baker Tilly employee benefit plan specialists can help, contact our team.