The Auditing Standards Board (ASB) of the AICPA has published two new Statements on Auditing Standards (SAS), SAS 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, and SAS 137, The Auditor’s Responsibilities Relating to Other Information Included in Annual Reports.
SAS 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA
A long-awaited standard, SAS 136 creates new AU-C section 703 in AICPA Professional Standards to address the auditor’s responsibility to form an opinion on the financial statements of employee benefit plans (EBPs) subject to the Employee Retirement Income Security Act of 1974 (ERISA).
The ASB developed SAS 136 to enhance the communicative value and transparency of the auditor’s report for ERISA plan financial statements. SAS 136 also includes performance requirements specific to auditing ERISA plans relating to engagement acceptance, audit risk assessment, and response relating to plan provisions, communication of reportable findings to those charged with governance, and responsibilities relating to the ERISA-required supplemental schedules.
Among other requirements, the new SAS 136 includes provisions that:
- Relate to acceptance of ERISA plan engagements;
- Provide that the auditor’s opinion should be based on an evaluation of the audit evidence obtained, including evidence obtained about comparative financial statements;
- Cover communications with management and those charged with governance;
- Requires additional the auditor to request additional written representations from management specifically relating to ERISA rules; and
- Relate to ERISA Form 5500 reporting requirements.
SAS 137, The Auditor’s Responsibilities Relating to Other Information Included in Annual Reports
SAS 137 addresses an auditor’s responsibilities relating to other information, whether financial or nonfinancial information, included in an entity’s annual report. The ASB designed the new requirements with the expectation that they would provide transparency related to the auditor’s responsibility for other information included in an annual report when the auditor has obtained all the other information at the date of the auditor’s report on the financial statements. For purposes of SAS 137, an entity’s annual report may be a single document or a combination of documents that serve the same purpose.
SAS 137 provides that other information is financial or nonfinancial information (other than financial statements and the auditor’s report thereon) included in an entity’s annual report. Other information may include amounts or other items that are intended to be the same as, to summarize, or to provide greater detail about amounts or other items in the financial statements and other amounts or other items about which the auditor has obtained knowledge in the audit. Other information may include nonfinancial information.
The AICPA also expects SAS 137 to reduce diversity in practice with respect to other information and documents considered to be within its scope.
The new ASB Other Information standard supersedes SAS 118, Other Information in Documents Containing Audited Financial Statements, as amended (AICPA, Professional Standards, AU-C sec. 720).
SAS 136 is effective for audits of ERISA plan financial statements, and SAS 137 is effective for audits of financial statements, for periods ending on or after December 15, 2020. Early implementation is not permitted for either.
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