In 2019, the AICPA issued Statement on Auditing Standards (SAS) No. 136, Forming an Opinion and Report on Financial Statements of Employee Benefit Plans Subject to ERISA. The latest regulatory updates within SAS 136 stress certain new performance requirements for financial statement audits of ERISA employee benefit plans.
In addition, SAS 136 changes the form and content of the related auditor’s report. The goal is to improve audit quality while also enhancing the communicative value and transparency of the report. The statement includes new requirements for all phases of employee benefit plan audits, including engagement acceptance, performance procedures, risk assessment and response, communication with those charged with governance, and reporting.
Originally, SAS 136 was scheduled to become effective for audits of ERISA plan financial statements for periods ending after December 15, 2020. However, this effective date has been pushed back one year—it is now effective for audits of ERISA plan financial statements for periods ending after December 15, 2021.
As a result, 2021 year-end audits being performed in 2022 must follow the performance and reporting requirements of SAS 136, as well as use the new form of the auditor’s report. Early adoption is permitted for 2020 year-end audits.
SAS 136 stipulates that audits will no longer be referred to as “limited scope” audits. Instead, these audits will be 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 the statement, an ERISA Section 103(a)(3)(c) audit is unique to employee benefit plans. Therefore, auditors will no longer issue a disclaimer opinion due to investment information that is certified by a qualified institution. Instead, the 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. It will also provide an opinion on whether the certified investment information contained in the financial statements agrees with or is derived from the certification.
In addition, SAS 136 contains a number of additional audit requirements, most of which have been performed by trained audit firms already, affecting the following areas:
The statement also requires several written representations from management, including representations that:
Finally, SAS 136 lists specific procedures to be performed by auditors when conducting an ERISA Section 103(a)(3)(c) exemption audit. These include the following:
Now is the time to start getting ready for the new effective date of SAS 136. By preparing well ahead of regulatory compliance, you’ll be less likely to encounter unexpected obstacles once the provisions become effective. Contact our audit experts if you have additional questions or need support with your benefit plan options.
