New Auditing Standard for Certain Employee Benefit Plans

In July, the Auditing Standards Board of the AICPA issued a final standard relating to the audits of employee benefit plans. Statement on Auditing Standards 136, Forming and Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA (“SAS 136”).

employee benefit plan audit

SAS 136 is effective for audits for the year ending December 31, 2020 so employee benefit plans currently subject to audits have one more year under the current rules and early implementation is not permitted. Generally speaking, retirement plans with 100 or more eligible participants are subject to annual audits as part of their submission of Form 5500.

Up until this new standard, many employee benefit plans were subject to what has been known as a “limited-scope audit” as long as the plan sponsor obtained a certification of the investment information from a qualified custodian or trustee.  The new standard will refer to these audits as an “ERISA section 103 (a) (3) (c) audit”.

The new auditor’s report will acknowledge that management has elected to have an audit performed in accordance with these regulations.  The report will have expanded language relating to management responsibilities regarding plan administration, participant records and the accuracy of the financial statements and footnotes.  The auditor’s opinion will be modified to address those audit areas that are not covered by the certification.

Plan sponsors should ensure that they obtain annual audit services from qualified providers.  While cost is always a factor, these audits are for the benefit of the plan’s participants, and plan sponsors have a fiduciary responsibility to protect these plan assets.