This guide is an ideal roadmap to compliance, giving auditors authoritative guidance, practical tips, and illustrative examples to help them at each stage of the audit. It is designed to bridge the gaps between the what, why, and how to satisfy auditor responsibilities.
Key topics covered include:
- Essential guidance for application of GAAS in an EBP audit.
- References to authoritative accounting guidance for defined contribution (DC), defined benefit (DB) and health and welfare (HW) plans in FASB ASC
- Guidance on accounting, reporting and disclosure for EBP transactions not addressed in FASB ASC as supported by FinREC
- Use of a SOC 1 report
- Use of a specialist (including actuaries and appraisers)
- Forming an opinion and reporting on EBP financial statements (for full and limited scope EBP audits)
- Illustrative auditor communications and financial statements
- Explanation of pervasive regulatory requirements (DOL rules and regulations)
Table of Contents
1 Introduction and Background .01-.37
Introduction .01-.07
Background .08-.12
Financial Accounting and Reporting for ERISA Plans .13-.21
Audit Requirements .22-.24
Operation and Administration .25-.34
Accounting Records .35-.37
2 Planning and General Auditing Considerations .01-.142
Overview .01-.10
Quality Control Standards, Including Client Acceptance and Continuance and Engagement Quality Control Reviews .11-.18
Audit Scope .19-.38
Engagement Letter .39-.43
Audit Planning .44-.62
Audit Risk .63
Transactions Processed by Service Organizations .64
Using the Work of a Specialist .65-.94
Related-Party and Party in Interest Transactions .95-.116
Audit Considerations 106-.116
Consideration of Laws and Regulations and Prohibited Transactions .117-.128
Accounting Estimates .129-.130
Going Concern Considerations .131-.133
Initial Audits of the Plan .134-.142
3 Audit Risk Assessment .01-.71
Overview .01
Audit Risk .02-.06
Planning Materiality .07-.11
Understanding the Entity and Its Environment, Including Its Internal Control .12-.29
Risks Assessment and the Design of Further Audit Procedures .30-.49
Evaluation of Misstatements Identified During the Audit .50-.53
Audit Documentation .54-.55
Consideration of Fraud .56-.71
4 Internal Control .01-.28
Using a Service Organization and Related Audit Considerations .11-.28
5 Defined Contribution Retirement Plans Including Employee Stock Ownership Plans .01-.801
5A Defined Contribution Retirement Plans .01-[.399]
Introduction and Background .01-.05
Administration and Operation of a DC Plan .06-.08
Accounting, Reporting, and Auditing DC Plans .09-.10
Financial Statements .11-.12
Net Assets Available for Benefits .13-.67
Changes in Net Assets Available for Benefits .68-.76
Financial Statement Disclosures .77-.96
403(b) Plans or Arrangements .97-.100
Plan Transfers (Plan Mergers, Spin-Offs, and Other Transfers) .101-.105
Going Concern .106
Terminating Plans (Full and Partial) .107-.114
Changes in Service Providers .115-[.199]
Auditing Considerations for DC Plans .200-[.399]
5B Employee Stock Ownership Plans .400-[.799]
Introduction and Background .400-.421
Administration and Operation of an ESOP .422-.423
Regulatory Reporting Requirements .424
Accounting, Reporting, and Auditing ESOPs .425-.426
Financial Statements .427-.429
Net Assets Available for Benefits .430-.461
Changes in Net Assets Available for Benefits .462-.473
Financial Statement Disclosures .474-.492
Plan Transfers (Plan Mergers, Spin-Offs, and Other Transfers) .493
Going Concern .494
Terminating Plans (Full and Partial) .495-.501
Changes in Service Organization .502-[.599]
Auditing Considerations for ESOPs .600-[.799]
Appendix A - Defined Contribution Retirement Plans .800
Appendix B - Regulations, Administration, and Operation of an ESOP .801
6 Defined Benefit Pension Plans .01-.207
Introduction and Background .01-.04
Administration and Operation of a DB Plan .05-.07
Accounting, Reporting, and Auditing DB Plans .08-.11
Financial Statements .12-.15
Net Assets Available for Benefits .16-.71
Changes in Net Assets Available for Benefits .72-.78
Accumulated Plan Benefits .79-.93
Changes in Accumulated Plan Benefits .94
Financial Statement Disclosures .95-.116
Plan Transfers (Plan Mergers, Spin-Offs, and Other Transfers) .117-.122
Going Concern .123
Terminating Plans (Full or Partial) and Frozen Plans .124-.135
Changes in Service Providers .136
Auditing Considerations for DB Plans .137-.207
7 Health and Welfare Benefit Plans .01-.240
Introduction and Scope .01-.11
Background .12-.17
Health and Welfare Arrangements .18-.25
Financial Statements .26-.31
Net Assets Available for Benefits .32-.77
Changes in Net Assets Available for Benefits .78-.90
Benefit Obligations .91-.127
Changes in Benefit Obligations .128-.129
Financial Statement Disclosures .130-.147
Plan Transfers (Plan Mergers, Spin-Offs, and Other Transfers) .148-.149
Going Concern .150
Terminating Plans .151-.160
Terminating Trusts .161-.162
Tax Considerations .163-.168
Changes in Service Providers .169
Auditing Considerations for H&W Plans .170-.237
Appendix A - The Annual Health Care Process .238
Appendix B - Examples of Health and Welfare Arrangements .239
Appendix C - Risk Assessment and Internal Control Considerations - Claim Payments .240
8 Investments .01-.172
Introduction .01-.02
Background .03-.14
Valuation of Investments .15-.16
Fair Value Measurement .17-.35
Accounting and Disclosure for Investments .36-.38
RICs (Mutual Funds) .39
Investments in CCTs .40-.42
Master Trust Arrangements .43-.46
Other Investments .47-.50
Contracts with Insurance Entities .51-.66
Derivatives and Hedging Activities .67-.77
Securities Lending Arrangements .78-.82
Financial Statement Disclosures .83-.94
Auditing Considerations for Investments .95-.172
Audit Procedures for Certain Plan Investments .128-.161
Investments in Securities That Are Valued Based on the Investee’s Financial Results .162-.164
Limited-Scope Auditing Procedures .165-.172
9 Plan Tax Status .01-.31
Nondiscrimination and Other Operating Tests for Plan Qualification .12-.14
Unrelated Business Taxable Income .15-.20
Income Taxes .21-.25
Auditing Considerations .26-.31
10 Concluding the Audit and Other Auditing Considerations .01-.40
The Form 5500 .03-.08
Commitments and Contingencies .09-.13
Subsequent Events .14
Evaluating the Risk of Material Misstatement Due to Fraud at or Near the End of the Audit .15
Plan Representations .16-.22
Communications with Those Charged With Governance .23-.35
Communicating Internal Control Related Matters Identified in an Audit .36-.39
DOL Access to Auditors’ Working Papers .40
11 The Auditor’s Report .01-.91
What This Chapter Provides .03-.05
Background .06-.17
Supplemental Schedules Relating to ERISA and DOL Regulations (Full-Scope Audits for Nonissuers) .18-.24
Unmodified Opinions - Defined Contribution Retirement Plans .25-.34
Unmodified Opinions - Defined Benefit Pension Plans .35-.36
Unmodified Opinion - Health and Welfare Benefit Plans .37
Unmodified Opinion - Reporting on the Financial Statements of a Trust .38-.39
Unmodified Opinion - Form 11-K Filings with the SEC .40-.45
Full-Scope Audits - Unmodified Opinions on the Financial Statements with Modifications to the Report on Supplementary Information .46-.52
Prohibited Transactions .53-.56
Limited-Scope Audits Under DOL Regulations .57-.71
Change in Trustee .72
Reporting on Supplemental Schedules in a Limited-Scope Audit .73-.76
Standard Limited-Scope Audit Reports with Modifications to the Report on Supplemental Schedules .77-.79
Other Scope Limitations .80
Accumulated Plan Benefits - GAAP Departures and Changes in Accounting Estimates .81-.83
Terminating Plans .84-.85
Substantial Doubt With Respect to Going Concern .86-.87
Initial Audits of Plans .88
Prior Period Financial Statements Not Audited .89-.91
Appendix
A ERISA and Related Regulations
B Examples of Controls
C Illustrations of Financial Statements: Defined Contribution Retirement Plans
D Illustrations of Financial Statements: Employee Stock Ownership Plans
E Illustrations of Financial Statements: Defined Benefit Pension Plans
F Illustrations of Financial Statements: Health and Welfare Benefit Plans
G Consideration of Fraud in a Financial Statement Audit
H The New Leases Standard: FASB ASC 842
I Overview of Statements on Quality Control Standards
J Schedule of Changes Made to the Text from the Previous Edition
Glossary
Index of Pronouncements and Other Technical Guidance
Subject Index
