SAS 136: It's Not Just About Reporting.

• Author: Parry, Thomas

In July 2019 the Accounting Standards Board (ASB) issued SAS 136 (AU-C Sec. 703) that changes reporting and performance requirements for audits of ERISA plan financial statements. The standard is effective for periods ending on or after Dec. 15, 2020; early adoption is not permitted.

Most notably, SAS 136 changes the form and content of the auditor's report when management elects to exclude from the audit certain investment information held and certified by a qualified institution, as permitted by ERISA. This new report format will apply to engagements that were known as "limited-scope" audits, now called "ERISA Sec. 103(a)(3)(C)" audits. Electing this option will no longer be considered a scope limitation.

This article focuses on those requirements unique to audits of ERISA plan financial statements. As we will discuss, these requirements go beyond reporting, but we will start with those.

Auditor's Report

While ERISA plan financial statements are explicitly excluded from the provisions of SAS 134 (AU-C Sec. 700A) that cover the new general audit reporting requirements, many requirements in AU-C Sec. 703 parallel those in AU-C Sec. 700A.

Beyond those, the requirements indicate that the "Management Responsibilities" section of the report should describe management's resnonsibililv for:

a. Maintaining a current plan instrument, including all plan amendments;

b. Administering the plan, and determining that its transactions are presented and disclosed in the financial statements are in conformity with the plan's provisions, including maintaining sufficient records with respect to each of the participants to determine the benefits due or which may become due to such participants; and

c. For an ERISA Sec. 103(a)(3)(C) audit, the election of the ERISA Sec. 103(a)(3)(C) audit and that the election does not affect management's responsibility for the financial statements.

In addition, for an ERISA Sec. 103(a)(3)(C) audit, the requirements add an additional section at the beginning of the report labeled "Scope and Nature of the ERISA Section 103(a)(3)(C) Audit." Implementation guidance suggests that auditors may issue two reports in the year of adoption, one for the current year ERISA Sec. 103(a)(3) (C) audit, and a disclaimer of opinion for the prior year. Examples of such reports are provided.

Reporting on Supplemental Schedules

SAS 136 also changes the reporting on ERISA-required supplemental schedules by modifying the reporting elements of AU-C...