| Dear Center Members: |
This alert contains information regarding:
- New SECURE 2.0 Act of 2022 resource
- ERISA Section 103(a)(3)(C) audit for a plan that does not require an audit
- Mandatory EBPAQC Membership Requirements Compliance Assessment Questionnaire
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SECURE 2.0 Act of 2022 considerations for auditors
The AICPA Employee Benefit Plan Audit Quality Center (EBPAQC) has developed a new non-authoritative resource to assist auditors of financial statements of employee benefit plans (EBPs) subject to the Employee Retirement Income Security Act of 1974 (ERISA) in understanding the provisions of the SECURE 2.0 Act of 2022 (Act) that may affect the ERISA plans they audit.
The Act, which includes numerous provisions that may be relevant to auditors of ERISA plans, was signed into law on December 29, 2022, as part of the Consolidated Appropriations Act, 2023. Plan amendments required by the Act generally need not be made until the end of the first plan year beginning on or after January 1, 2025; however, plans must be operated in accordance with the effective date of each new provision.
This resource provides a summary of those provisions and their effective dates, the types of plans and audit areas to which they may relate, and references to non-authoritative resources and authoritative guidance to assist auditors in understanding the provisions and determining how they may affect the audit.
Click here for the SECURE 2.0 Act of 2022 considerations for auditors.
ERISA Section 103(a)(3)(C) audit for a plan that does not require an audit
The Department of Labor's (DOL) recent changes to Form 5500 redefined large plans by the number of participants with account balances on the first day of the plan year. Per Form 5500, a plan with at least 100 participants with active accounts is considered a large plan and an audit is required. This provision applies to defined contribution plans and is effective for plan years that begin on or after January 1, 2023. Previously large plans with at least 100 eligible participants required an audit. The DOL estimates that nearly 20,000 plans previously considered large plans will no longer be subject to the annual audit requirement due to this change.
This change has led to situations in which plan sponsors have a plan that no longer requires an audit but would like to have the plan audited as part of fulfilling its own fiduciary duties or for other reasons (e.g., the plan has an auto-enrollment feature and the plan sponsor believes the plan will soon require an audit). Auditors have inquired as to whether an ERISA Section 103(a)(3)(C) audit can be performed if the plan does not have an audit requirement.
In most cases, there does not appear to be anything in the professional standards, laws, or regulations that would preclude an auditor from accepting such an engagement. An auditor may accept an ERISA Section 103(a)(3)(C) audit engagement when no requirement for such audit exists, provided there is no management-imposed scope limitation on the engagement, except as permitted by the DOL's Field Assistance Bulletin No. 2009-02, Annual Reporting Requirements for 403(b) Plans.
Under the professional standards, an auditor is precluded from accepting an audit engagement if management imposes a limitation on the scope of the auditor’s work, such that the auditor believes the limitation will result in the auditor disclaiming an opinion on the financial statements, and the entity is not required by law or regulation to have an audit.
AU-C section 210, Terms of an Engagement, paragraph .07 states:
If management or those charged with governance of an entity that it is not required by law or regulation to have an audit impose a limitation on the scope of the auditor’s work in the terms of a proposed audit engagement, such that the auditor believes the limitation will result in the auditor disclaiming an opinion on the financial statements as a whole, the auditor should not accept such a limited engagement as an audit engagement.
As explained in paragraph .A141-.A142 of AU-C section 703, an ERISA Section 103(a)(3)(C) audit is unique to employee benefit plans and is not considered a scope limitation under AU-C section 705. As such, an ERISA Section 103(a)(3)(C) audit may be performed, unless there is another reason the auditor may know in advance in which management imposes a limitation on the scope of the auditor’s work that will result in a disclaimer of opinion. For example, if the plan has not maintained sufficient accounting records and supporting documentation and the auditor is unable to apply certain auditing procedures, the auditor may need to disclaim an opinion on the ERISA plan financial statements and ERISA-required supplemental schedules.
While the Department of Labor (DOL) has not issued formal, authoritative guidance, Michael Auerbach, Chief Accountant, DOL Office of the Chief Accountant, did address the subject early in the May 10, 2023, Employee Benefit Plan Town Hall session. Mr. Auerbach states that he does not see anything in the regulations that would preclude a plan from having an ERISA Section 103(a)(3)(C) audit because such an audit is not required.
Mandatory EBPAQC Membership Requirements Compliance Assessment Questionnaire
The annual mandatory EBPAQC Membership Requirements Compliance Assessment Questionnaire will be emailed to EBPAQC firms on October 30. This questionnaire addresses your firm's compliance with AICPA Employee Benefit Plan Audit Quality Center membership requirements for the compliance year October 1, 2022 to September 30, 2023. Completion of the questionnaire by December 8, 2023, is mandatory for all member firms.
For your convenience, this questionnaire is being sent to both your firm’s Designated Audit Quality Partner (DAQP) and Administrative Contact (if a different individual than the DAQP) to complete on behalf of your firm. Please coordinate one response for your firm. Prior to completing the questionnaire, we recommend you review the membership requirements and the related questions and answers.
We ask that you please complete it by December 8. If you do not receive the compliance questionnaire or have questions about completing the questionnaire, please email the Center at ebpaqc@aicpa.org.
Sincerely,
AICPA Employee Benefit Plans Audit Quality Center |
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