AICPA issues auditing standards for employee benefit plans and annual reports

The American Institute of CPAs’ Auditing Standards Board has released a pair of auditing standards related to the financial statements of employment benefit plans and transparency in annual reports.

The first of the two, Statement on Auditing Standards No. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, creates a new section in the AICPA Professional Standards and deals with the auditor’s responsibility to form an opinion and report on the audit of financial statements of employee benefit plans subject to the Employee Retirement Income Security Act of 1974 (also known as ERISA).

“In the ASB’s continued efforts to improve the transparency of auditor reporting in general, this new SAS specifically addresses the significant public interest associated with audits of employee benefit plans subject to ERISA and was undertaken in consultation with the U.S. Department of Labor,” said AICPA Chief Auditor Robert Dohrer in a statement.

The AICPA has taken steps in recent years to improve the quality of employee benefit plan audits after the Labor Deartment issued a critical report in 2015 on the state of ERISA plan audits (see AICPA pushes for auditing and assurance changes). The Labor Department’s Employee Benefits Security Administration found serious deficiencies in 39 percent of the audits of employee benefit plans that it examined. In response, the AICPA developed a six-point plan to improve audits, and launched a certification program to better train CPAs on auditing employee benefit plans as part of its Enhancing Audit Quality initiative.

SAS No. 136 aims to improve the communicative value and transparency of the auditor’s report for ERISA plan financial statements, and to include performance requirements for auditing ERISA plans in terms of engagement acceptance, audit risk assessment and response relating to plan provisions, communication of reportable findings to those charged with governance, and responsibilities relating to the ERISA-required supplemental schedules, among other items. It’s effective for audits of ERISA plan financial statements for periods ending on or after Dec. 15, 2020. Early implementation isn’t allowed.

With the second standard, Statement on Auditing Standards (SAS) No. 137, The Auditor’s Responsibilities Relating to Other Information Included in Annual Reports, the goal is to provide more transparency for users of audited financial statements by reducing some of the diversity in practice with respect to information and documents. It supersedes SAS No. 118, Other Information in Documents Containing Audited Financial Statements, as amended (AICPA, Professional Standards, AU-C sec. 720).

“SAS No. 137 is another piece of the Auditing Standards Board’s efforts in the public interest to enhance transparency in reporting related to the auditor’s responsibilities for non-financial statement information included in annual reports,” said Dohrer.

This standard takes effect for audits of financial statements for periods ending on or after Dec. 15, 2020. Early implementation isn’t permitted with this SAS either.

For more information on these and other AICPA auditing standards, click here.