Benefit Plan Audit Changes Delayed One Year

As plan sponsors are quickly approaching the October 15^th filing deadline the focus is on taking care of last-minute details with the plan auditor. Ensuring all questions are answered and any last-minute information is provided is essential in the final weeks. Once the deadline passes, plan sponsors will then focus on ensuring compliance with the changes mandated in the SECURE and CARES Act by the end of the year. Concurrently, SAS 136 – Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, which changes limited scope audits will become effective at the end of 2020. Managing all of these changes can be especially challenging as many Atlanta businesses are still dealing with the pandemic. This has left many feeling overwhelmed and unable to focus beyond business recovery. The good news is that the American Institute of Certified Public Accountants (AICPA) announced a one-year delay for SAS 136 implementation allowing additional time to prepare for the change. To help clients, prospects, and others, Wilson Lewis has provided a summary of plan audit changes below.

Limited Scope Audit Changes

SAS 136 is over one hundred pages long and covers a number of topics, but the most important one is the change to limited scope audits. Under existing regulations, investments held by a bank or trust company subject to regular examinations by government agencies do not need to be audited if the holding institution certifies the information is true and correct. The certification limits the scope of the audit work required and most auditors will choose to disclaim an opinion about them all together.

Under the new regulations, limited scope audits are renamed to ERISA Section 103(a)(3)(C) and make significant changes to how these audits are conducted. Plan auditors are now required to complete the following:

• Perform specific procedures to review the assets’ investment certifications.
• Evaluate management’s conclusion that the investment certifications are from qualified institutions.
• Compare asset information with other audit disclosures for continuity; and,
• Assess whether management’s disclosures about their investment assets appear to be compliant with GAAP.

These audit tasks will allow for the issuance of an opinion on whether the investment information matches statements prepared by the holding institution and whether non-investment information is presented fairly and in accordance with Generally Accepted Accounting Principles (GAAP).

Management Responsibilities

Although many of the changes in SAS 136 apply to how the audit is conducted there are also new responsibilities that will fall on company management. This includes the addition of three certifications which are compulsory as part of the ERISA Section 103(a)(3)(c) audit. They include certification a limited scope audit is permissible, the confidence the entity certifying investment information is qualified to do so, and the certified information is properly represented. In addition, management must accept responsibility for the plan, maintain a current plan instrument, and relevant participant records.

In addition, management is also required to provide a completed, draft version, of Form 5500 for review. It is important to note that related forms and schedules should also be included. The purpose of the change is to allow time to identify if there are any inconsistencies or misstatements prior to issuing the audit report. 

Audit Report Changes

The new regulations also make changes to the auditor’s report which includes moving the opinion to the beginning of the report and removal of the disclaimer opinion on investments. Since plan auditors will be required to perform tests on this information, they will be able to issue an unmodified, or another opinion, as appropriate. Information describing the basis for the opinion, key audit matters, and then management’s responsibilities for the financial statements will also be outlined. While many of these elements are already included in the report, the format and content will undergo some changes.

Contact Us

There are significant modifications to how plan audits will be conducted under SAS 136. Given the amount of work that must be completed by management, the one-year implementation delay is welcome news. If you have questions about SAS 136, the one-year delay, or need assistance with your benefit plan audit, Wilson Lewis can help. For additional information call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon.