The American Institute of CPAs has proposed a new standard for auditing the financial statements of employee benefit plans, after the Department of Labor released a report criticizing the quality of ERISA plan audits.
The AICPA’s Auditing Standards Board issued an exposure draft for the proposed standard Thursday. Proposed Statement on Auditing Standards (SAS), Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, would specifically address audits of financial statements of employee benefit plans subject to the Employee Retirement Income Security Act of 1974, or ERISA for short.
The Department of Labor issued a report in 2015 criticizing the quality of employee benefit plan audits by CPAs, and the AICPA has pledged to fix the problem (see AICPA Pushes for Auditing and Assurance Changes). The Labor Department’s Employee Benefits Security Administration found serious deficiencies in 39 percent of the audits of employee benefit plans that it examined. In response, the AICPA developed a six-point plan to improve audits, and last year, the AICPA launched a certification program to better train CPAs on auditing employee benefit plans as part of its Enhancing Audit Quality initiative.
The new proposed standard deals with an auditor’s responsibilities in forming an opinion and reporting on the financial statements of ERISA plan financial statements, along with the form and content of such reporting, including reporting on specific plan provisions relating to the ERISA plan financial statements and reporting when management imposes a limitation on the scope of the audit in accordance with ERISA section 103(a)(3)(C).
For audits of ERISA plan financial statements only, the proposed standard would apply in place of AU-C section 700, Forming an Opinion and Reporting on Financial Statements (AICPA, Professional Standards), and paragraph .09 of AU-C section 725, Supplementary Information in Relation to the Financial Statements as a Whole (AICPA, Professional Standards). It would also amend several other sections of the AICPA's Professional Standards for auditors. The proposed standard would take effect for audits of financial statements for periods ending on or after Dec. 15, 2018.
The AICPA is asking for comments on the draft standard by Aug. 21, 2017.