Background: Statement on Auditing Standards (SAS) No. 136 prescribes certain new performance requirements for an audit of financial statements of employee benefit plans subject to the Employee Retirement Income Security Act of 1974 (ERISA), and changes the form and content of the related auditor’s report. The original effective date of the SAS was for audits of plan financial statements for periods ending on or after December 15, 2020. As a result of the COVID-19 pandemic, the effective date was delayed until periods ending on or after December 15, 2021. Early implementation is allowed as of the original effective date.

Expanded Auditor Responsibilities in the Following Areas:

  • Client engagement acceptance
  • Audit risk assessment and response, including consideration of the most current plan instrument and its provisions
  • Communications with those charged with governance and management
  • Procedures for an ERISA section 103(a)(3)(C) audit
  • Considerations relating to Form 5500 and any supplemental information

Expanded Required Management Representations to Include:

  • Maintaining a current plan instrument
  • Administering the Plan and their fiduciary responsibilities
  • Providing the auditor with a complete draft of Form 5500 prior to the date of the auditor’s report.

Limited Scope Audits: The audits previously referred to as “ERISA limited scope audits” will be referred to as “ERISA Section 103(a)(3)(C) audits”. Under the current standard for “limited scope audits”, auditors rely on the plan trustee’s certification of investments and related activity to narrow the scope of the audit and the auditor’s report contains language that disclaims an opinion due to the activity covered by the certification. ERISA Section 103(a)(3)(C) audits will be similar in that auditors may still rely upon a trustee’s certification to reduce the required testing of investment activity; however, the elimination of these procedures is not viewed as a scope limitation because there is still work auditors perform on the investments. As a result, the form and the content of the auditor’s report will be changed. The new audit opinion for an ERISA Section 103(a)(3)(C) audit will be considered an unmodified opinion, without a disclaimer.

The EBPA team at PBMares is ready to help plan sponsors navigate the expanded requirements of the new auditing standards as well as other recent changes affecting qualified plans. Qualified plans sponsors are in the midst of changes made by the SECURE Act (enacted in December 2019) and the CARES Act (enacted in March 2020) in addition to the required Cycle-3 restatement for most defined contributions plan to utilize pre-approved plan documents.

For additional information, please reach out to any of the PBMares EBPA team.