ERISA 103(a)(3)(C) Audit Standard: Limited Scope Audit and Reducing Disclaimers

Description

In 2019, the AICPA issued SAS 136, which made significant changes to virtually every aspect of audits of EBPs covered by ERISA. The most significant impact was the inclusion of Section 103(a)(3)(C) audit rules, which increases the auditor's responsibilities in performing audits. In April 2020, the AICPA Auditing Standards Board voted to delay implementation by one year due to the ongoing coronavirus pandemic.

ERISA Section 103(a)(3)(c) permits a plan sponsor to request a limited scope audit of the ERISA plan, in which plan management may elect to exclude from the audit certain investment information held and certified to by a "qualified institution" such as a bank or insurance carrier. In such a limited scope audit, auditors issue a disclaimer of opinion on the financial statements. However, as the number of limited scope audits has increased, DOL studies have found a very high rate of audit deficiencies in limited scope audits.

In response to these deficiencies, the AICPA created the ERISA Section 103(a)(3)(C) audit provisions to impose duties on auditors performing engagements in which plan management elects to exclude plan investment information. Instead of issuing disclaimers, auditors must issue an opinion that excludes the certified assets and must obtain and evaluate management representations as to which investment information is certified, and that the entity issuing the certification is a qualified institution under DOL regulations.

Listen as our experienced panel provides a critical analysis of the ERISA Section 103(a)(3)(c) audit rule and the changes to the "limited scope audit" allowances.