In early May, the American Institute of CPAs (AICPA) Auditing Standards Board (ASB) released a new Statement on Auditing Standards (SAS). The new SAS, which is entitled Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements, aims to raise the quality of audits in a number of areas, including risk assessment, transparency, and communication.
As part of the SAS, there are a number of changes to the auditing and reporting requirements currently in place, which will place an increased level of scrutiny on both auditors and management alike. The new SAS is effective for financial statement audits ending on or after December 15, 2020 (early implementation is not allowed).
Under the new SAS, the following significant changes will occur:
- Improving both the level of communication and relevance of the auditor’s report, which includes addressing compliance matters in the audit report itself that is made public with the Form 5500 filing.
- Audit election should not be considered as a scope limitation. In addition, a limited scope audit is now called an ERISA 103(a)(3)(C) audit. Therefore, the audit opinion and other financial disclosures around limited scope audits will see significant changes.
- Altering the “limited scope” report, which will now be aimed to reflect what an auditor is accomplishing in those kinds of reports.
- Reporting on ERISA required supplemental schedules will now be distinguished between those that are ERISA-required schedules and ones that are included but are not required to be by ERISA.
- Reporting on specific plan provisions will now aim to discuss both risk assessment and response from both management and the auditors’ perspective. This will also lead to different and increased documentation in the financial statements.
- Auditors are to accept an ERISA plan audit engagement and relay to management findings that are identified during the auditing of ERISA plan financial statements. Additional disclosures and communications will result from this change.
At CRI, our professionals are already being trained for these audit and reporting changes. We encourage anyone with questions regarding the new standard to contact the professionals at CRI.