Change – it’s unavoidable. And while it can be a good thing, there are times when change brings about its own share of complications. For example, when the Department of Labor released the results of its audit quality study, the American Institute of Certified Public Accountants, among others, realized changes were needed to improve the quality of employee benefit plan audits across the board. After two years in the making, the AICPA has finally released proposed Statement of Auditing Standards (SAS). Once established, the AICPA says these standards will help improve audit quality.
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What’s On The Table
The proposed SAS creates a new reporting model for employee benefit plan audits. If implemented, the new standards would change the audit opinion of the plan financial statements provided while expanding plan sponsor and the plan auditor responsibilities.
Auditors currently use a risk-based approach when auditing a plan. This method determines the level of risk associated with specific accounts as a result of improper reports and incorrect data. Auditors then determine the impact these risks have on a plan’s financial statements. In addition to using the risk-based approach, the proposed SAS requires auditors to perform procedures on certain predetermined accounts or areas, regardless of whether they were subject to the audit procedures outlined under the risk-based approach in the past. Any findings from these new procedures must then be recorded in the auditor’s report. This report, which is attached to the Form 5500 will be available to regulators, plan participants, competitors and anyone else in the general public.
In a separate action, Form 5500 is also undergoing some proposed changes, scheduled to take effect for plan years ending Dec. 15, 2018 and later – but only time will tell if any or all proposed changes will actually be enacted by the proposed date. If they do take effect, it’s clear that the proposed revisions will require additional work on the plan sponsor’s part.
Suggestions And Solutions Are Welcome
As you are reading this, you’ve probably identified the underlying theme: More, More, More. But it’s important to note that more is not always better. If the end goal is to enhance audit quality, then we must consider the many paths available to get there. Then (and only then) can we arrive at the most effective solution for all parties affected by these proposed changes.
There is still time.
While the Auditing Standards Board has offered us this potential solution, they are still taking input and suggestions from anybody who may have an opinion on the matter. If you’d like to weigh in, you may email Sherry Hazel at Sherry.Hazel@aicpa-cima.com. You can also email Rea & Associates. We will be glad to incorporate your ideas and solutions into our firm’s response to the proposed changes.
By Darlene Finzer, CPA, QKA, CSA (New Philadelphia office)
For more insights about the changes coming for benefit plan services, check out these articles:
New Auditor Of State Requirements Will Affect You
‘Noteworthy Changes’ Shake Up Filing Requirements Among Plan Sponsors