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ASB Issues Statements on Auditor Reporting and Transparency in Annual Reports

Fiduciary Rules and Practices

The Auditing Standards Board (ASB) of the American Institute of CPAs (AICPA) has issued two new statements on auditing standards: one concerning auditor reporting on financial statements by plans covered by ERISA, and the other concerning transparency in annual reports.

Statement on Auditing Standards No. 136

Statement on Auditing Standards No. 136, “Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA,” creates a new AU-C section 703 in AICPA Professional Standards and addresses the auditor’s responsibility to form an opinion and report on the audit of financial statements of employee benefit plans subject to ERISA. According to AICPA, it is the result of an effort to:

  1. enhance the communicative value and transparency of the auditor’s report for ERISA plan financial statements, and
  2. include 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.

This SAS applies to audits of single employer, multiple employer and multiemployer plans covered by ERISA, as well as an audit of a complete set of general purpose financial statements of plans covered by ERISA and addresses:

  • the auditor’s responsibility to form an opinion on the financial statements of employee benefit plans covered by ERISA;
  • the form and content of the auditor’s report issued as a result of an audit of ERISA plan financial statements; and
  • the auditor’s responsibilities for forming an opinion on ERISA plan financial statements, including the form and content of the report when management elects to have an audit performed under ERISA Section 103(a)(3)(C).

The ASB consulted with the Department of Labor in arriving at SAS No. 136, according to AICPA Chief Auditor Robert Dohrer.

Statement on Auditing Standards No. 137

Statement on Auditing Standards (SAS) No. 137, “The Auditor’s Responsibilities Relating to Other Information Included in Annual Reports,” supersedes SAS No. 118, “Other Information in Documents Containing Audited Financial Statements,” as amended. AICPA says that it intends the SAS to benefit users of audited financial statements by providing transparency and reducing divergent practices regarding information and documents within its scope. Dohrer added in a press release that it is “another piece of the Auditing Standards Board’s efforts in the public interest to enhance transparency in reporting related to the auditor’s responsibilities for non-financial statement information included in annual reports.”

This SAS requires auditors to read and consider the other information. This is because other information that is materially inconsistent with financial statements or what an auditor learns during an audit may indicate a material misstatement of (1) the financial statements or (2) the other information, either of which may undermine the credibility of the financial statements and the auditor’s report. This SAS also may be applied, and adapted as necessary, to other documents the auditor examines.

Effective Date

Both become effective for the functions they address on Dec. 15, 2020; SAS No. 136 for audits of ERISA plan financial statements for periods ending on or after that date, and SAS No. 137 for audits of financial statements for periods ending on or after that date.