Prepare for increased responsibility and more thorough audit procedures and reports
What you should know
Limited scope audits now called ERISA section 103(a)(3)(C) audits
In addition to a name change, plan sponsors’ responsibilities are increased to include:
- Providing written acknowledgement that all the conditions are met and that an ERISA section 103(a)(3)(C) audit is permissible
- Assessing whether the entity issuing the investment certification is a qualified institution
- Providing the auditor a substantially complete Form 5500 draft before issuance of the auditor’s report
- Determining whether the investment certification meets the ERISA requirement
- Determining if the certified investment information is appropriately measured, presented, and disclosed
Changes to the audit engagement letter will make clear the plan sponsor’s responsibility to:
- Maintain a plan instrument, including all plan amendments
- Administer the plan and maintain sufficient records for plan transactions
- Maintain accurate financial statements
SAS 136 requires auditors to provide certain reportable findings in writing to plan management and those charged with governance, including:
- Instances of noncompliance or suspected noncompliance with laws or regulations
- Findings that, in the auditor's professional judgment, are significant and relevant to those charged with governance, regarding their responsibility to oversee the financial reporting process
- Indications of deficiencies in internal controls identified during the audit that have not been communicated to management by other parties and are of sufficient importance to merit management's attention.
Audit firms can elect early adoption of SAS 136 as of the original effective date of plan years ending on or after December 15, 2020.
Early preparation is critical as 2021 year-end audits being performed in 2022 will be required to follow SAS 136 performance and reporting requirements. Plan sponsors should work with their plan auditor to understand what actions can be taken to fulfill increased responsibilities in advance of their next plan audit, including any necessary planning and coordination with their Form 5500 preparer and the auditor.