Your independent auditor has always adhered to auditing standards established by The Audit Standards Board of the American Institute of Certified Public Accountants (AICPA).
This year, new standards will be implemented for your employee benefit plan audit.
In July of 2019, AICPA issued a new set of standards (SAS 136) that affect both you as the plan’s manager and your plan auditor. Initially delayed due to COVID-19, implementation of these provisions became effective as of December 15, 2021, although early implementation was allowed.
If you have 100 or more participants and have been obtaining a limited scope audit, your audit will now be called an ERISA Section103(a)(3)(C) audit and is subject to these new standards.
The goal is to enhance the quality of audits and protect the financial integrity of your employee benefit plan by clarifying the responsibilities of plan management and auditors.
To start, your audit engagement letter will include new requirements for you. It will be important to read this year’s letter carefully to understand your additional responsibilities as the plan sponsor.
The letter will outline new responsibilities for administration of the plan, maintaining sufficient records of transactions and benefits, and submitting financial statements. As the plan sponsor, you now are required to acknowledge your responsibilities in writing.
There may be additional questions and requests addressed to you during the audit process, and the final audit report will be more thorough and will look different from those you have received in the past.
SAS 136 will not change the actual audit procedure substantially. However, the auditor will be required to report certain findings in writing to plan management.
These could include issues or suspected issues of noncompliance, concerns over the implementation of oversight responsibilities, and deficiencies in internal control not communicated to the plan administrators.
To identify potential inconsistencies or misstatements between the financial statements and Form 5500, the auditor must receive a substantially complete draft of Form 5500 to review before the audit report date.
Finally, as mentioned above, the auditor will be using a revised form for the audit report intended to improve clarity and transparency.
It is not too soon to start getting ready for the new SAS 136 requirements. Begin by discussing these changes with your plan administrators so they can be prepared to fulfill new responsibilities and requirements.
And most importantly, consider having your audit done earlier in the year. Even if you just completed your audit, you can get started now on your next one.
Inconsistencies or errors found in 2020 most likely continued into 2021. And you will benefit from finding any new inconsistencies sooner rather than later.
It makes financial sense to stop the bleeding sooner, and you will minimize the pressure of complying with new requirements early, rather than at year’s end!
If this is your first audit, or you have had limited scope audits done before, give us a call to discuss handling your ERISA Section103(a)(3)(C) audit. Contact Cassell Plan Audits at 630.886.7669 for more information and to schedule your appointment.
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