Summary
The AICPA (American Institute of Certified Public Accountants) Auditing Standards Board has released a draft of a proposed new auditing standard for employee benefit plans that are subject to the Employee Retirement Income Security Act (ERISA). The proposed new standard addresses the auditor’s responsibilities in performing these types of audits and changes the form and content of the auditor’s report when management imposes a limited scope audit. In addition, the proposed new standard includes a requirement to report findings from procedures performed on specific plan provisions related to the financial statements. The proposed standard also prescribes certain new performance requirements that are focused on plan instrument provisions and would be required irrespective of the risk of material misstatement.
Reasoning for a New Reporting Standard
The AICPA proposal is a response to critiques of employee benefit plan audits which were raised by the Department of Labor in 2015. As detailed in the proposed new standard, the Department of Labor found one or more major deficiencies in 39% of the employee benefit plan audits it reviewed. Additionally, 17% of the auditor’s reports that were reviewed failed to comply with one or more of ERISA’s reporting and disclosure requirements. In response to this, the AICPA developed a six-point program to improve these audits along with launching a certification program to better train CPAs on performing these kinds of audits. (The author of this blog has the AICPA Advanced Defined Contribution Plans Audit Certificate).
Key Dates
The AICPA is seeking comments on the exposure draft of the proposed standard. The deadline for these comments is August 21, 2017.
The anticipated effective date of the proposed standard will be for audits of ERISA plan financial statements for periods ending on or after December 15, 2018.
Please note this summary of the proposed standard is not meant to substitute for reading it in its entirety.