DOL Disclaimer Audit Opinion Proposed Changes

Comments are due by August 21, 2017, on proposed changes to the audit opinion issued on DOL disclaimer audits, including detailing findings noted during audit procedures.

On April 20, 2017, the Auditing Standards Board (“ASB”) issued an Exposure Draft, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA.  The Exposure Draft is, in part, in response to a special task force created by the ASB to improve the quality of employee benefit plan audits.  A recent report issued by Employee Benefits Security Administration noted that almost 40% of audits reviewed had one or more major deficiencies, and almost 20% of auditor’s reports failed to comply with ERISA disclosure and reporting requirements.  The task force was asked to enhance the reporting to provide the public with better insight as to management’s responsibilities, as well as those of the auditor.  As all annual Form 5500s and associated auditor reports are filed with the DOL, they are easily accessible to all individuals or organizations, including plan participants and the DOL.

Major provisions of the ASB Exposure Draft include:

  • Requiring the auditor to test certain plan provisions in all ERISA audits and detail all findings (including exceptions or errors) in the auditor’s report. This would include reporting findings that the plan sponsor has no obligation to report in the financial statements or the Form 5500.  While management would have the ability to respond to such findings, this could result in additional work for the auditor, the plan sponsor, or the plan’s ERISA council as the plan sponsor would likely want to review all descriptions of findings that will be included in the audit report.
  • Change the form of the auditor’s report and require management to review the certification statement obtained from the Trustee or Custodian and determine that a limited scope audit is permissible. When management utilizes the limited scope audit, the auditor would issue an opinion that describes the responsibilities of the auditor, management, and other considerations including an expanded other-matter paragraph.
  • Auditors will obtain more written representations from management than currently required

The ASB requests comments be submitted by August 21, 2017, to Sherry Hazel (sherry.hazel@aicpa-cima.com).  Should the proposal be implemented, it will be effective for audits of financial statements ending on or after December 15, 2018.

Montgomery Coscia Greilich LLP will be preparing and submitting a comment.