by Andrew Stear, CPA, Manager
In July 2019, the AICPA’s Auditing Standards Board issued the Statement on Auditing Standards No. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA (“SAS 136”). The goal of the standard is to increase the communication and transparency value of the auditor’s report, in ERISA plan financial statements, to the intended users. While the bulk of SAS 136 is geared to the plan auditor there are some requirements that plan management needs to be aware of. This article will identify some of the new key requirements and assertions that are specific to plan management’s responsibility.
The first responsibility of management begins with engagement acceptance. Under the new standard, audit engagement letters will now specifically address assertions required from management which should include:
1) Maintaining a current plan instrument, including all plan amendments
2) Administering the plan and determining that the plan’s transactions that are presented and disclosed in the ERISA plan financial statements are in conformity with the plan’s provisions, including maintaining sufficient records with respect to each of the participants to determine the benefits due or which may become due to such participants
3) When management elects to have an ERISA Section 103(a)(3)(C) audit (formerly known as a limited scope audit), determining whether
a. an ERISA 103(a)(3)(C) audit is permissible under the circumstances,
b. the investment information is prepared and certified by a qualified institution,
c. the certification meets the requirements in 29 CFR 2520.103-5
d. the certified investment information is appropriately measured, presented and disclosed in accordance with the applicable financial reporting framework
Management will be requested to provide these assertions in the form of written representations at the conclusion of the audit to further solidify management’s responsibility. In addition to the new assertions for management’s responsibility, plan management will also be required to provide plan auditors with a substantially complete Form 5500 prior to the completion of the audit.
The new standard originally had an effective date for financial statement audits for periods ending on or after December 15, 2020. Due to the ongoing coronavirus pandemic, standards 134-140 were delayed one year and are now effective for financial statement audits for periods ending on or after December 15, 2021.