Armanino Blog
Article

Full-Scope vs. Limited-Scope Benefit Plan Audits

April 10, 2017

Updated February 2, 2022

Employee benefit plans with 100 or more participants are required to have an independent audit each year. Yet, the Employee Retirement Income Security Act (ERISA) is unique in that it allows plan managers to opt for a limited-scope audit of their financial statements.

In a full-scope audit, everything in the plan is subject to testing. By contrast, with a limited-scope audit, the auditor does not perform auditing procedures on investment information that is prepared and certified by the trustee or custodian. This information typically includes details on investments, investment income and related expenses.

Here, a qualified institution is a bank, insurance carrier or similar institution that is regulated and supervised by a state or federal agency.

What’s in an Opinion?

During a full-scope audit, the auditors look at everything — from contributions and benefit payments to the valuation of investments and related earnings. Therefore, the auditors are able to provide an opinion about whether the plan’s financial statements — including supplemental schedules — are presented fairly in accordance with generally accepted accounting principles (GAAP).

With a limited-scope audit, auditors are not able to express a formal opinion because, while they still perform tests of contributions and benefit payments, significant investment information is provided by an outside party and is not formally audited. In fact, the CPA very specifically disclaims having an opinion. Note that a disclaimer of opinion is acceptable to the U.S. Department of Labor as part of a limited-scope audit.

Who’s Responsible?

Plan administrators have a fiduciary duty to ensure that a qualified institution has certified both the accuracy and the completeness of the investment information. In addition, it needs to be determined that the certification covers all plan investments. If not, these investments and related income would need to be subject to full-scope procedures.

In the end, a quality audit will not only help plan fiduciaries fulfill their legal duties, but it will also provide the reliable information needed to prudently manage and administer the plan.


Do You Know Which Type of Benefit Plan Audit You Need?

You may be able to opt for a limited-scope benefit plan audit. Is this an option for you — and if so, is it a good idea? These are just two of the many questions plan administrators must address to fulfill their fiduciary obligations. To find the answers and support you need as a benefit plan administrator, reach out to our Benefit Plan Audit consultants.

Stay In Touch

Sign up to stay up-to-date with the latest accounting regulations, best practices, industry news and technology insights to run your business.

Resources
Related News & Insights
Employee Retention Credit (ERC)
Article
The CCA increases the credit and allows PPP borrowers to take advantage of it.

February 02, 2024
Boutique Marketing Firm Saves $100Ks in Taxes and Finds Strategic Tax Advisor They’ve Searched For
Case Study
Episode Four moved from no confidence in its tax situation to total confidence, thanks to the right questions.

August 04, 2023
Meeting State Retirement Plan Mandates: A Strategic Approach for Employers
Article
These best practices and considerations can help you meet requirements and provide a valued benefit to your employees.

May 23, 2023