Although this new auditing standard is still being discussed and has not been finalized, the proposed standard has some significant effects for Plan management.
The Auditing Standards Board, which is an AICPA committee tasked with creating new auditing standards, has proposed a new Statement on Auditing Standards, AU-C Section 703, Forming An Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA. This proposed standard is intended to improve the relevance of the auditor report and to improve the quality of employee benefit plan (EBP) audits by strengthening the EBP auditor’s report. The proposed standard would be effective for audits of plans for the year ending December 31, 2018.
The proposed standard includes new required procedures when an ERISA limited scope audit is performed, an expanded description of management’s responsibilities, new communication on the ERISA supplemental schedules, new required emphasis-of-matter paragraphs, and a new Report on Specific Plan Provisions Relating to the Financial Statements.
The Report on Specific Plan Provisions has the most potential to affect plan sponsors. The proposed standard requires the auditor to report findings or issues (other than those that are clearly inconsequential) in the auditor’s report. These findings would include issues found during the testing performed on participant eligibility, benefit payments, participant vesting provisions, employer contributions, use of forfeitures, etc. These findings would either be presented directly on the auditor’s report, as a reference to a separate deliverable discussing these findings that would be made directly in the auditor’s report. The findings would become public information when the Form 5500 and related auditor’s report are filed with the Department of Labor.
LBMC is preparing a response to express our concerns with the proposed auditing standard. If you have any questions or would like to discuss any concerns that you might have with the proposed standard, please contact us. Comments are due August 21, 2017.