Auditing standard imposes new responsibilities on plan sponsors

The American Institute of Certified Public Accountants (AICPA) released a new auditing standard for employee benefit plans in July 2019. The new standard is commonly referred to as SAS 136, but its official name is Statement on Auditing Standards (SAS) No. 136, Forming an opinion and report on the financial statements of employee benefit plans submitted to ERISA.

Although SAS 136 imposes new obligations on auditors, sponsors of employee benefit plans also have increased responsibilities under this new standard.

SAS 136 was initially in effect for periods ending on or after December 15, 2020. Due to the COVID-19 pandemic, the effective date has been postponed to December 15, 2021. Auditors can implement the standard as of the original effective date, so plan sponsors may want to familiarize themselves with the new rules now to make sure they’re ready.


In general, the Employees Retirement Income Security Act (ERISA) requires that a sponsor of a plan with 100 or more members at the start of the plan year engage a qualified independent accountant to perform an audit. plan financial statements. Article 103 (a) (3) (C) of ERISA gives plan sponsors the option of choosing limited scope audits. In this type of audit, the auditor does not verify investment information prepared and certified by a “qualified institution”, such as a bank, insurance company or similar financial institution, provided that the institution certifies both the accuracy and completeness of the information submitted. .

Since the scope of the audit is limited, the auditor may issue an opinion disclaimer.

The US Department of Labor (DOL) has expressed concern about limited scope audits. After carrying out a study on the quality of the audits of the plans, the DOL discovered major shortcomings in the audits of the ERISA plans. The AICPA issued SAS 136 in response to DOL findings aimed at improving the quality of audits of employee benefit plans submitted to ERISA

SAS 136

SAS 136 addresses the responsibilities of auditors when conducting audits of the ERISA plan. The new standard affects all phases of audits, including acceptance of assignments and reporting. It also significantly reviews the form and content of the audit report to ensure greater transparency regarding the scope and nature of the audit. In addition, the new standard requires plan sponsors to provide additional information and documentation to the auditor. The following key provisions may have major implications for plan sponsors.

Limited scope audits

Plan sponsors may continue to exclude certified investment information from an audit in accordance with ERISA. However, under SAS 136, limited scope audits are now referred to as “ERISA Section 103 (a) (3) (C) audits” and no longer have a scope limitation. Therefore, instead of issuing an opinion disclaimer, an auditor will issue an opinion which will consist of two parts: (1) an opinion on the fairness of the information in the financial statements not covered by the assurance and (2) an opinion on whether the information about the investments in the financial statements is consistent with the information in the certification.

If a plan sponsor chooses an ERISA Section 103 (a) (3) (C) audit, the plan sponsor must provide the auditor with written acknowledgment that the audit is authorized and that the certification meets the ERISA requirements.

Acknowledgment of responsibility

Under SAS 136, the plan sponsor will have to acknowledge its responsibility for the administration of the plan in the audit engagement letter. In addition, the plan sponsor will be required to provide certain written statements at the end of the audit regarding its responsibilities. These responsibilities include maintaining a copy of the current plan document and amendments, ensuring that plan transactions comply with the plan provisions, and maintaining a sufficient number of member records to determine the benefits due under the plan. under the scheme.

While a plan sponsor may use a service provider to help administer the plan, it is the sponsor’s responsibility to ensure that plan documents are kept and that plan transactions are accurate. and properly documented.

Form 5500

Prior to issuance of an audit report, SAS 136 requires plan sponsors to provide auditors with a substantially completed draft Form 5500, including associated appendices. The auditor will review the documents to identify any material inconsistencies between the financial statements and the Form 5500. If there are any discrepancies, the auditor will determine whether the Form 5500 or the financial statements need to be corrected.

The plan sponsor may need to coordinate with the Form 5500 preparer to ensure that the auditor receives a largely completed Form 5500 in a timely manner.

Once SAS 136 takes effect, plan sponsors may spend more time preparing for the audit. Plan sponsors may want to ensure they understand their new responsibilities, assess current procedures, and make any necessary adjustments to comply with the new SAS 136 requirements.

Deborah Andrews
is a lawyer in the Washington, DC office of Ogletree Deakins law firm, and her practice encompasses a wide range of benefits and executive compensation matters.
Ruth Anne Collins Michels is a lawyer in the firm’s Atlanta office, where she practices exclusively in the area of ​​employee benefits law.
This article was
originally published, in a slightly different form, on the firm’s website.
© 2021, Ogletree, Deakins, Nash, Smoak & Stewart, PC All rights reserved. Republished with permission.

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