Employee Benefit Plan Audits – Changes are Coming in 2022

By Brett Thomas, CPA

Along with all the changes in both our everyday lives and in accounting that we have experienced over the past couple of years, employee benefit plan audits are about to see changes as well.

The American Institute of Certified Public Accounts (AICPA) recently issued Statement on Auditing Standards (SAS) No. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA. With the release of this standard, you will likely notice certain changes in future employee benefit plan financial statement audits. The standard has new performance requirements for auditors and changes the form and content of the audit report itself. The standard is effective for audits of ERISA plan financial statement periods ending on or after Dec. 15, 2021. So, if you have not already seen these changes, you will during 2021 audits performed in 2022.

The standard will impact all phases of the audit including client acceptance, risk assessment and response, communication with those charged with governance, performance procedures, and reporting. The standard establishes new performance and reporting requirements specific to ERISA Section 103(a)(3)(C) audits. The ERISA Section 103(a)(3)(C) audit is unique to employee benefit plans and is not considered a scope limitation. Accordingly, an audit performed pursuant to ERISA Section 103(a)(3)(C) will no longer be referred to as a “limited scope audit,” but rather going forward will be referred to as an “ERISA Section 103(a)(3)(C) audit.”

One area this standard puts emphasis on is the acceptance of the engagement in which the auditor will request that, through the engagement letter, management acknowledge their responsibilities including maintaining a current plan instrument, administering the plan and providing the auditor with a substantially complete draft Form 5500 prior to the dating of the auditors’ report.

Further, when management elects to have an ERISA Section 103(a)(3)(C) audit, management must acknowledge that this type of audit is permissible, and the investment information is prepared and certified investment information is appropriately measured, presented and disclosed in accordance with the applicable financial reporting framework. The auditors also will now be required to obtain certain written management representations at the conclusion of the audit regarding those responsibilities.

While we do not believe these changes will be overly burdensome for plan management, you should be aware that there may be some new requests and additional procedures in upcoming employee benefit plan audits due to this new standard.

If you have any questions surrounding the new standard or how this will impact audits, please reach out to Brett Thomas and we’ll be happy to discuss this further.