On April 20, 2017, the AICPA Auditing Standards Board (ASB) published the proposed Statement on Auditing Standards (SAS), Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA. The SAS refers specifically to audits of ERISA employee benefit plan financial statements.
This proposed SAS is the result of efforts by the ASB to improve the quality of benefit plan audits by strengthening the auditor’s report. A DOL report issued in 2015 found that 39 percent of the 400 plan audits examined by the DOL had one or more major deficiencies. In addition, 17 percent of the plan audits examined failed to comply with one or more of ERISA’s reporting and disclosure requirements.
The proposed SAS reflects a proposed new reporting model for audits of ERISA plans that changes the form and content of the auditor’s report when management imposes an ERISA-permitted audit scope limitation. It also includes a requirement to report findings from procedures performed on specific plan provisions relating to the financial statements.
Some accounting firms are concerned that if this requirement is approved, information about operational errors will be released into the public domain, which could be damaging to plan administrators, sponsors and auditors. Not only will this add additional costs to the auditing process, but it could subject sponsors to significant risks of litigation.
The AICPA is currently reviewing public comments to the proposed SAS and is expected to make a final decision soon. If approved, the proposed SAS would be effective for audits of financial statements for periods ending on or after Dec. 15, 2018. Therefore, now is the time to begin preparing for the potential effects on audits of your plan’s financial statements.
Contact Holtzman Partners’ Employee Benefit Plan team at 512.610.7200 if you have more questions about the proposed Statement on Auditing Standards.