| (803) 791-1111 | CLIENT LOG IN
Three years ago, the AICPA issued Statement on Auditing Standards (SAS) No. 136. This statement prescribed new performance requirements for financial statement audits of ERISA employee benefit plans and changed the form and content of the auditor’s report.
SAS 136 was originally scheduled to become effective for audits of employee benefit plan statements for periods ending after December 15, 2020. But due to the pandemic and other factors, the effective date was pushed back by one year. The statement is now effective for audits of benefit plan financial statements for periods ending after December 15, 2021.
This means that 2021 plan audits being done this year must follow the statement’s performance and reporting requirements and use the new form of the auditor’s report.
SAS 136 is intended to improve audit quality and enhance the communicative value and transparency of the audit report. It includes new requirements for plan audits in the areas of reporting, engagement acceptance, performance procedures and communication with those charged with governance.
The statement makes a major change in employee benefit plan terminology. “Limited-scope” audits will no longer be referred to as such — instead, they are now referred to as ERISA Section 103(a)(3)(c) audits. This is not considered a scope limitation and will no longer be considered a disclaimer of opinion.
According to SAS 136, auditors will no longer issue a disclaimer opinion due to investment information that is certified by a qualified institution. Instead, the audit report will provide a two-pronged opinion based on the audit and the procedures performed relating to the certified investment information.
The audit report will provide an opinion on whether the information not covered by the certification is presented fairly. In addition, it will provide an opinion on whether the certified investment information in the financial statements agrees with or is derived from the certification.
SAS 136 also contains some additional plan audit requirements. These will affect areas such as engagement acceptance, audit risk assessment and response, forming an opinion on financial statements and Form 55000 filing.
In addition, plan sponsors must provide written representations indicating that management has provided the auditor with the most current plan instrument and all plan amendments. Sponsors must also acknowledge management’s responsibility for administering the plan and determining that transactions conform with the plan’s provisions, as well as acknowledge that management’s election of an ERISA Section 103(a)(3)(c) audit does not affect its responsibility for the financial statements.
When electing to have a Section 103(a)(3)(c) audit performed, plan sponsors must determine whether an audit is permissible under the circumstances. Sponsors also must determine if the investment information is prepared and certified by a qualified institution and is appropriately measured, presented and disclosed.
Plan sponsors should be prepared to explain how they determined that the entity preparing and certifying the investment information is a qualified institution. Sponsors must agree to provide a substantially complete draft of Form 5500 before the auditor’s report is dated.
Meanwhile, auditors will now perform specific procedures when conducting a Section 103(a)(3)(c) audit, including:
SAS 136 will result in big changes this year for employee benefit plan sponsors, so now is the time to get familiar with the new standard if you haven’t yet. Give us a call at (803) 791-1111 or send us an email if you’d like to talk about your plan in more detail.
Information is provided by William Amick & Blake Amick and written by Don Sadler,
a non-affiliate of Cetera Advisor Networks LLC.
This post is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.
Investment Advisor Representatives offering securities and advisory services through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker/dealer and Registered Investment Adviser. Cetera is under
separate ownership from any other named entity.
171 LOTT CT, WEST COLUMBIA, SC 29169
Thank you!
Please try again.
Investment Advisory Representatives offer advisory products and services through Longleaf Advisory Services, LLC, a Registered Investment Advisor.
171 Lott Court
West Columbia, SC 29169
All Rights Reserved | Longleaf Advisors
Investment Advisory Representatives offer advisory products and services through Longleaf Advisory Services, LLC, a Registered Investment Advisor.