Employee benefit plans are usually not an area of great concern for most companies.
This audit is often of less concern than the company’s financial statement audit and therefore doesn’t receive the attention it deserves. It’s unlikely that many have noticed, but the quality of benefit plan audits has generally been on the decline over the past few years. In fact, the Department of Labor issued a report in 2015 that highlighted the current state of plan audit effectiveness. According to the report, Assessing the Quality of Employee Benefit Plan Audits, it was discovered that 39% of audits reviewed had one or more major deficiency. In order to resolve these concerns, the AICPA issued proposed regulatory changes to increase the effectiveness of plans audits. To help clients, prospects and others understand the impact of the proposed changes, Hanson & Co has provided a summary below.
The proposed changes are 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 new proposal indicates the direction that plan audit changes will go over the coming years. While it is not final, it offers insight into what plan sponsors can expect from the audit process in the future. If you have a question about the proposal or need assistance with your employee benefit plan audit, Hanson & Co can help. For additional information call us at (303) 388-1010, or click here to contact us. We look forward to speaking with you soon.