| Dear Center Members: |
This alert includes information about:
- EBPAQC plan expenses primer
- EBPAQC primer on actuarial method and assumptions used in defined benefit plans
- EBPAQC "Topix" primer series
- New auditing standards issued on audit evidence and auditing accounting estimates
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New EBPAQC primer on plan expenses
The EBPAQC primer, Employee benefit plan expenses, provides a general understanding of plan expenses. There are a variety of plan expenses, including those related to establishing the plan, plan administration, investments and investment options, and fees paid to persons or companies providing services to the plan. This primer discusses types of plan expenses; fee arrangements; and who pays plan expenses; and includes a quick reference table and a list of additional resources available.
Click here for the EBPAQC primer on plan expenses.
New EBPAQC primer on actuarial method and assumptions used in defined benefit plans
The EBPAQC primer, Actuarial method and assumptions used in measuring accumulated plan benefits in defined benefit pension plans, provides a general understanding of the actuarial method and assumptions used in measuring the actuarial present value of accumulated plan benefits under FASB ASC 960, Employee Benefit Plan Accounting—Defined Benefit Pension Plans. This primer addresses accumulated plan benefits, the actuarial method, actuarial valuation, actuarial valuation inputs, actuarial assumptions, and the actuarial valuation report.
Click here for the EBPAQC primer on defined benefit plan actuarial method and assumptions.
EBPAQC's "Topix" primer series
The new primers discussed above are the most recent additions to the EBPAQC's "Topix" primer series. Primers are intended to provide a basic overview of EBP-specific topics. They can be used to educate staff in formal or informal training, and they also may be shared with clients to help them better understand their plans. Other primers, which also are available on the EBPAQC website, include:
- Definition of compensation in an employee benefit plan
- Employee benefit plans—parties in interest and prohibited transactions
- Health and welfare employee benefit plans
- Employee stock ownership plans
- Limited scope audits
- Master trusts in employee benefit plans
- Multiemployer employee benefit plans
- Multiple employer retirement plans and multiple employer welfare arrangements
- Tax and compliance issues for 401(k) plans
- Insurance company products offered to employee benefit plans
- Plan investments in bank collective investment funds
- 403(b) plans
- Alternative investments in employee benefit plans
- Cash balance plans
- Stable value funds and investment contract
Click here to access the EBPAQC Topix Primers.
Auditing Standards Board issues new auditing standards on audit evidence and auditing accounting estimates
The AICPA Auditing Standards Board recently issued two new auditing standards, SAS No. 142, Audit Evidence, and SAS No. 143, Auditing Accounting Estimates and Related Disclosures, as well as related resources to assist practitioners in understanding and applying the standards. Both standards are effective for periods ending on or after December 15, 2022.
SAS No. 142, Audit Evidence
SAS No. 142 explains what constitutes audit evidence in an audit of financial statements and sets out attributes of information—accuracy, completeness, authenticity, and susceptibility to bias—that are taken into account by the auditor when evaluating information to be used as audit evidence. It focuses on the evaluation of the sufficiency and appropriateness of the audit evidence itself, whereas the extant standard focuses on the design and performance of audit procedures to obtain sufficient appropriate audit evidence. SAS No. 142 also addresses the evolving nature of transacting business and the evolution of audit services, including:
- use of emerging technologies and techniques by both preparers and auditors,
- the application of professional skepticism,
- the expanding use of external information sources to provide audit evidence,
- and the relevance and reliability of audit evidence.
The new SAS provides examples to illustrate how automated tools and techniques, such as audit data analytics, may be used by the auditor, and also permits the auditor to use automated tools and techniques to perform both a risk assessment procedure and a substantive procedure concurrently if the objectives of both types of procedures are achieved.
SAS No. 142 also includes an amendment relocating content dealing with management's specialists (e.g., actuaries, appraisers) from AU-C section 500 to section 501, Audit Evidence — Specific Considerations for Selected Items.
Click here for SAS No. 142 on the AICPA's website.
Click here for the AICPA SAS No. 142 At a Glance document.
SAS No. 143, Auditing Accounting Estimates and Related Disclosures
SAS No. 143 addresses the auditor's responsibilities relating to accounting estimates—including fair value accounting estimates—and related disclosures in an audit of financial statements. It enables auditors to appropriately address the increasingly complex scenarios that arise from new accounting standards that include estimates.
To enhance the auditing standards relating to auditing accounting estimates and the auditor's focus on factors driving estimation uncertainty and potential management bias, SAS No. 143:
- explains the nature of accounting estimates and the concept of estimation uncertainty,
- provides information about scalability of the SAS for all types of accounting estimates, from those that are relatively simple to those that are complex,
- requires a separate assessment of inherent risk and control risk at the assertion level,
- includes an enhanced risk assessment intended to address the challenges auditors face when auditing accounting estimates by providing risk assessment requirements that are more specific to estimates and addresses the increasingly complex business environment and complexity in financial reporting frameworks,
- emphasizes that the auditor's further audit procedures need to be responsive to the reasons for the assessed risks of material misstatement at the relevant assertion level,
- refers to relevant requirements in other AU-C sections and provides related guidance to emphasize the importance of the auditor's decisions about controls relating to accounting estimates,
- addresses the exercise of professional skepticism when auditing accounting estimates, and
- requires the auditor to evaluate, based on the audit procedures performed and the audit evidence obtained, whether the accounting estimates and related disclosures are reasonable in the context of the applicable financial reporting framework.
Click here for SAS No. 143 on the AICPA's website.
Click here for the AICPA SAS No. 143 At a Glance document.
Click here to view an illustration of linkages between SAS No. 143 (AU-C Section 540) and Other AU-C Sections.
Sincerely,
AICPA Employee Benefit Plans Audit Quality Center |
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