Proposed Statement on Auditing Standards | Employee Benefit AuditWhitney Irish
Post by Larry Beebe
The Auditing Standards Board (ASB) of the American Institute of Certified Public Accountants (AUCPA) has issued a proposed change to the auditing standards a CPA must follow in conducting an employee benefit audit.
The proposed changes include
- Requiring certain additional procedures in an employee benefit audit “…irrespective of the risk of material misstatement.” Any findings of the CPA as a result of the additional procedures would have to be detailed in the auditor’s report. The auditor’s report, as a consequence, might become extremely lengthy.
- Requiring additional work by the CPA with respect to the Form 5500, Annual Return/Report of Employee Benefit Plan, required to be filed by the plan being audited.
- Requiring an emphasis-of-matter paragraph in the auditor’s report when certain events take place in the employee benefit plan being audited. These include significant plan amendments, minimum funding waivers granted by IRS and significant changes in the nature of the plan.
- Requiring additional procedures to be performed when a CPA performs a limited scope audit. In a limited scope audit a permitted entity certifies investments and the CPA does not have to audit these investments in conducting an audit examination.
- Altering the form and content of the auditor’s opinion when a limited scope examination is performed. The new audit report would be approximately four pages in length.
The proposed standard was issued on April 21, 2017 and written comments to the AICPA are required by August 21, 2017. The goal of the proposed auditing standards is to “…improve the communicative value and relevance of the auditing report.”
Our concern, at Bond Beebe, is that the proposed changes will significantly raise audit costs and will not accomplish the intended goals. Quality CPA firms will perform additional work while our fear is that firms who perform just a few employee benefit audits will ignore the new standards just as they ignore current standards.
We, at Bond Beebe, plan to draft a comprehensive response to the proposed standards and we plan to propose alternative solutions to the problem of audit quality relating to employee benefit audits.
The International Foundation of Employee Benefit Plans has designated a four person group, chaired by Larry Beebe of Bond Beebe, to draft a response to the proposed standards.
We will keep you posted. We ask that you submit your own response to the proposal.
The exposure draft issued by the AICPA is 112 pages in length. If you would like a copy of it, please let us know.