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Upcoming Audit Standard for Employee Benefit Plan Audits

Published by Kim Moore on Dec 10, 2020 6:00:00 AM

Does your 401(k) plan require an annual audit by a certified public accountant? If so, you should be asking your current auditor what the plans are for your audit and the upcoming audit reporting standard change. This article describes the upcoming standard changes and what it means for your plan and related audit.

Two new audit standards have been approved that will impact the performance and potential timing of your upcoming audits.  They are:

  • SAS 134 – Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements. This standard impacts all audits.
    • Effective for audits covering periods ending on or after December 15, 2020. However, this effective date was moved back to December 15, 2021 as the required implementation date.  Early adoption is permitted so your auditor may want to implement for the 2020 audit of your plan, although this is not required.
    • Will change the audit opinion letter requirements. The form and content of the report will change.
    • Probably not a big change for you as the Plan Sponsor, but it will be a significant change for your auditor.
      New auditing standards 16374-1
  • SAS 136 – Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plan Subject to ERISA
    • This standard only applies to benefit plan audits (but does apply to all 401k plan audits).
    • Will dramatically change the audit report for 401k plan audits. Again, not much of a change to you as the Plan Sponsor, but will be a significant change for your auditor.

    • Limited scope audits will be replaced by 103(a)(3)(C) audits. What a mouthful!

    • There will be new requirements for you as the Plan Sponsor.

    • Management will need to acknowledge their responsibility for:
      • Maintaining current plan documents including all amendments.
      • Administering the plan and ensuring all transactions are in conformity with plan provisions.
      • Maintaining sufficient records with regard to all transactions involving the plan.
      • Determining that the new 103(a)(3)(C) type of audit is appropriate. Documenting these procedures and providing them to the auditor at the beginning of the audit.               
      • Verifying your responsibility for preparing and presenting the financial statements of the plan.

    • Also, the auditor is now required to provide findings to you in writing.
    • The 5500 final draft report will need to be provided to the auditor before the audit can be completed.
    • The auditor will now issue an opinion on the financial statements unlike the limited scope opinion letters which were disclaimer opinions.

      The above information is not a complete summary of all the changes that will be required as part of the new accounting standards. However, as you can see, there are many implications for you and your audit. We recommend you review the above with your auditor as soon as possible to ensure they are prepared for the upcoming changes. Find out when they will be implementing the new standards (when will this impact your audit). Ask what the auditors have done to prepare themselves for the new requirements?  Have they considered the timing of these changes? It is important that you review the new standards with your auditors to ensure both of you are prepared for the changes and that the changes will not impact your compliance requirements and the ability of your plan to file its annual audit report timely.

      As the plan sponsor, when it’s time to audit your plan, it’s vital that you hire an experienced auditor to ensure your plan is in compliance. At Summit CPA, we specialize in retirement plan audits. We have the ability to offer assistance entirely off-site with little or no distraction to your daily office routine. We also offer flat-fee pricing so there are no surprises on your bill when the job is complete. For assistance, contact our office at (866) 497-9761 to schedule an appointment.


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