Proposed Changes to the Way Benefit Plan Audits Are Conducted
On April 20, 2017, the AICPA issued Exposure Draft AU-C sec. 703 entitled, “Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA.” Because the change is still in the draft stage by the AICPA Auditing Standards Board, there is an opportunity for the public to comment on the draft prior to August 21. Smith & Howard will be submitting our comments and we recommend that you do so, as well.
Following is a brief summary of the change in the standards and the anticipated effects on employers and on the way audits are conducted. Supporting documentation referenced in this article can be found by clicking the PDF icon at the top of this article.
While there are several proposed changes in AU-C sec. 703, the one that we would like to bring to your attention is Issue 6 – Certain Requirements for Audits of ERISA Plan Financial Statements and Related Required Report on Specific Plan Provisions Relating to the Financial Statements. A synopsis of Issue 6 can be found on pages 11-12 of the referenced PDF.
In brief, were this revision be implemented, it would require any finding by an audit firm as well as the accompanying response by the client to be attached to the Form 5500 and made public. For example, were an employer to have missed granting eligibility timely to an employee benefit plan, the auditor’s finding as well as the employer’s response would be included in the public filing of the 5500.
In addition to making all findings and responses public, the new rules will create extra steps and processes – and therefore additional time – by audit firms on each benefit plan engagement. This could ultimately be reflected in increased fees.
While we respect and agree with the AICPA’s goal to enhance benefit plan audit quality, we do not believe that this current proposal is the optimum path forward.
What We Are Doing
We are submitting our comments to the AICPA. If you are an existing Smith & Howard EBP audit client, we will discuss this proposal with you during this year’s EBP audit.
What You Can Do
- Provide comments to the AICPA. The AICPA has asked that written comments meet a few criteria:
- Refer to specific paragraphs (in this case, you would refer to Issue 6, Paragraphs 15-16 and the Reporting of Findings, Paragraphs 119-124 of the referenced PDF.
- Include your reasons for the comments
- Send this information directly to Sherry Hazel at Sherry.Hazel@aicpa.cima.com
Due date for comments is August 21, 2017. All supporting documentation is attached. If you would like to discuss this us prior to submitting comments, please call Lori Wagnon at 404-874-6244 or complete the brief form below.