Most companies invest a significant amount of time managing their financial statement audits. After all, the result of the audit is critical to maintaining banking, vendor and other relationships. While this is certainly important, it unfortunately leaves less time and attention available for the benefit plan audit. Generally speaking, most companies don’t give plan audit management the time and attention it deserves. This was confirmed in a report issued by the Department of Labor in 2015, Assessing the Quality of Employee Benefit Plan Audits. A key finding was that 39% of the audits reviewed had one or more major deficiency. To resolve these concerns, the AICPA recently issued proposed regulatory changes to the procedures governing how plans are audited. To help clients, prospects and others understand the impact of the proposed changes, JLK Rosenberger has provided a summary overview below.
The proposed changes known as, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, outlines several changes to how plan audits are conducted. The new proposed standards address an auditor’s responsibilities when forming and reporting an opinion on the condition of a benefit plan’s financial statement. Highlights of the proposal include:
- Changes to the content of the auditor’s report for limited scope audits;
- Requirements to expand auditor reporting from audit procedures performed on plan provisions; and also
- New requirements for written representations from management which were previously not required.
The changes will likely require plan auditors to expand their testing in certain areas with the results of the testing and information reviews being reported in the auditor’s report which accompanies IRS Form 5500. It’s clear from the new proposed standards, that benefit plan auditors will be required to conduct a more thorough set of audit standards, especially if it is a limited scope audit engagement. It’s important to note that the new standards, if approved, will become effective for plan audits ending on or after December 15, 2018.
The proposed changes by the AICPA are likely not to be finalized in their current form as there is a comment period which allows practitioners the opportunity to suggest changes. However, the proposal does provide plan administrators with insights into how they can expect the plan audit process to change in the future. If you have questions about the proposal or if you would like assistance with your benefit plan audit, JLK Rosenberger can help. For additional information please call us at 949-860-9902, or click here to contact us. We look forward to speaking with you soon.