Employee Benefit Plans, 2019 E-Book

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: AICPA Audit and Accounting Guide
• Sprache: Englisch

Seitenzahl: 1807

Veröffentlichungsjahr: 2019

Beschreibung

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)

Leseprobe

Preface

(Updated as of January 1, 2019)

This guide was prepared by the Employee Benefit Plans Committee.

About AICPA Audit and Accounting Guides

This AICPA Audit and Accounting Guide has been developed by the AICPA Employee Benefit Plans Expert Panel and the Guide Overhaul Task Force to assist practitioners in performing and reporting on their audit engagements and to assist management of employee benefit plans in the preparation of their financial statements in conformity with U.S. generally accepted accounting principles (GAAP).

AICPA Guides may include certain content presented as “Supplement,” “Appendix,” or “Exhibit.” A supplement is a reproduction, in whole or in part, of authoritative guidance originally issued by a standard setting body (including regulatory bodies) and applicable to entities or engagements within the purview of that standard setter, independent of the authoritative status of the applicable AICPA Guide. Both appendixes and exhibits are included for informational purposes and have no authoritative status.

Accounting Content

The Financial Reporting Executive Committee (FinREC) is the designated senior committee of the AICPA authorized to speak for the AICPA in the areas of financial accounting and reporting. Conforming changes made to the financial accounting and reporting guidance contained in this guide are approved by the FinREC Chair (or his or her designee). Updates made to the financial accounting and reporting guidance in this guide exceeding that of conforming changes are approved by the affirmative vote of at least two-thirds of the members of FinREC.

This guide does the following:

•     Identifies certain requirements set forth in FASB Accounting Standards Codification® (ASC).

•     Describes FinREC’s understanding of prevalent or sole industry practice concerning certain issues. In addition, this guide may indicate that FinREC expresses a preference for the prevalent or sole industry practice, or it may indicate that FinREC expresses a preference for another practice that is not the prevalent or sole industry practice; alternatively, FinREC may express no view on the matter.

•     Identifies certain other, but not necessarily all, industry practices concerning certain accounting issues without expressing FinREC’s views on them.

•     Provides guidance that has been supported by FinREC on the accounting, reporting, or disclosure treatment of transactions or events that are not set forth in FASB ASC.

Accounting guidance for nongovernmental entities included in an AICPA Guide is a source of nonauthoritative accounting guidance. As discussed later in this preface, FASB ASC is the authoritative source of U.S. accounting and reporting standards for nongovernmental entities, in addition to guidance issued by the SEC. The accounting provisions of this guide are not intended to apply to employee benefit plans of governmental entities. AICPA members should be prepared to justify departures from GAAP, as discussed in “Accounting Principles Rule” (ET sec. 1.320.001).1

Auditing Content

An AICPA Guide containing auditing guidance related to generally accepted auditing standards (GAAS) is recognized as an interpretive publication as defined in AU-C section 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance With Generally Accepted Auditing Standards.2 Interpretive publications are recommendations on the application of GAAS in specific circumstances, including engagements for entities in specialized industries.

Interpretive publications are issued under the authority of the AICPA Auditing Standards Board (ASB) after all ASB members have been provided an opportunity to consider and comment on whether the proposed interpretive publication is consistent with GAAS. The members of the ASB have found the auditing guidance in this guide to be consistent with existing GAAS.

Although interpretive publications are not auditing standards, AU-C section 200 requires the auditor to consider applicable interpretive publications in planning and performing the audit because interpretive publications are relevant to the proper application of GAAS in specific circumstances. If the auditor does not apply the auditing guidance in an applicable interpretive publication, the auditor should document how the requirements of GAAS were complied with in the circumstances addressed by such auditing guidance.

Throughout this guide, when appropriate, reference is made to Technical Questions and Answers (Q&A).3 A Q&A is an other auditing publication. AU-C section 200 indicates that in applying the auditing guidance included in an other auditing publication, the auditor should, exercising professional judgment, assess the relevance and appropriateness of such guidance to the circumstances of the audit. Other auditing publications have no authoritative status; however, they may help the auditor understand and apply GAAS. The auditor is not expected to be aware of the full body of other auditing publications. Although the auditor determines the relevance of these publications in accordance with paragraph .28 of AU-C section 200, the auditor may presume that other auditing publications published by the AICPA that have been reviewed by the AICPA Audit and Attest Standards staff are appropriate. These other auditing publications are listed in AU-C appendix F, Other Auditing Publications.

The ASB is the designated senior committee of the AICPA authorized to speak for the AICPA on all matters related to auditing. Conforming changes made to the auditing guidance contained in this guide are approved by the ASB Chair (or his or her designee) and the Director of the AICPA Audit and Attest Standards Staff. Updates made to the auditing guidance in this guide exceeding that of conforming changes are issued after all ASB members have been provided an opportunity to consider and comment on whether the guide is consistent with the Statements on Auditing Standards (SASs).

Any auditing guidance in a guide appendix or exhibit (whether a chapter or back matter appendix or exhibit), though not authoritative, is considered an “other auditing publication.” In applying such guidance, the auditor should, exercising professional judgment, assess the relevance and appropriateness of such guidance to the circumstances of the audit. Although the auditor determines the relevance of other auditing guidance, auditing guidance in a guide appendix or exhibit has been reviewed by the AICPA Audit and Attest Standards staff and the auditor may presume that it is appropriate.

Purpose and Applicability

This guide applies to the financial statements of employee benefit plans, including defined contribution retirement plans,4 defined benefit pension plans, and health and welfare benefit plans, that are subject to the financial reporting requirements of the Employee Retirement Income Security Act of 1974 (ERISA), as well as those that are not. See chapter 1, “Introduction and Background,” for further information. Appendix A, “ERISA and Related Regulations,” identifies and summarizes relevant ERISA requirements and regulations.

This guide does not discuss the application of all GAAP and all GAAS that are relevant to the preparation and audit of financial statements of employee benefit plans. This guide is directed primarily to those aspects of the preparation and audit of financial statements that are unique to employee benefit plans or are considered particularly significant to them.

The guide contains example auditing procedures. Detailed internal control questionnaires and audit programs are not included. The nature, timing, and extent of auditing procedures are a matter of professional judgment and will vary depending on the size, organizational structure, risk assessment, internal control, and other factors in a specific engagement.

The guide also includes information regarding statutory rules and regulations applicable to employee benefit plans and illustrations of plan financial statements and auditors' reports. The Department of Labor Employee Benefits Security Administration strongly encourages the use of this guide in meeting the requirements contained in ERISA Section 103 that a plan have an audit conducted in accordance with GAAS.

The guidance in this Audit and Accounting Guide is in certain respects more detailed than that generally included in other AICPA Audit and Accounting Guides. To facilitate reference, paragraphs have been numbered.

Recognition

2019 Guide Edition

AICPA Senior Committees

Auditing Standards Board

Financial Reporting Executive Committee

Gregory L. Hardy,

ASB Member

Daniel Noll,

Senior Director AICPA Accounting Standards and FinREC Staff Liaison

Michael J. Santay,

Chair

James Dolinar,

Chair

The AICPA gratefully acknowledges those members of the AICPA Employee Benefit Plans Expert Panel who reviewed or otherwise contributed to the development of this edition of the guide: Josie Hammond (Task Force Chair), Beth Thompson (Expert Panel Chair), Darlene Bayardo, Eileen Brassil, Michelle Buckley, Sandi Carrier, Greg Clark, Catherine Daubek, Judith Goldberg, Chip Harris, Kathleen McLaughlin, Stacy Meyer, Kriste Naples-DeAngelo, David Torrillo, and Michele Weldon. The AICPA also gratefully acknowledges Mark Ritter and the Office of the Chief Accountant, Employee Benefits Security Administration, U.S. Department of Labor.

The AICPA staff would also like to acknowledge the invaluable assistance of JulieAnn Verrekia provided in updating and maintaining the guidance in this guide.

2017 Guide Edition

(Updates to this edition exceeded that of conforming changes.)

AICPA Senior Committees

Auditing Standards Board

Financial Reporting Executive Committee

Ilene Kassman,

ASB Member

Daniel Noll,

FinREC Staff Liaison

Michael J. Santay,

Chair

James Dolinar,

Chair

Gerry Boaz

Michelle Avery

Jay Brodish, Jr.

Muneera Carr

Dora Burzenski

Cathy Clarke

Joseph Cascio

Mark Crowley

Lawrence Gill

Rick Day

Steve Glover

Richard Dietrich

Gaylen Hansen

William Fellows

Tracy Harding

Josh Forgione

Daniel Hevia

Gautam Goswami

Alan Long

Robert Owens

Rich Miller

Jay Seliber

Dan Montgomery

Jeff Sisk

Steven Morrison

Brian Stevens

Rick Reisig

Angela Storm

Catherine Schweigel

Jeremy Whitaker

Jere G. Shawver

M. Chad Singletary

The AICPA gratefully acknowledges those members of the AICPA Employee Benefit Plans Expert Panel who reviewed or otherwise contributed to the development of this edition of the guide: Josephine Hammond (Task Force Chair), Beth Thompson (Expert Panel Chair), Darlene Bayardo, Mark Blackburn, Eileen Brassil, Sandi Carrier, Judith Goldberg, Chip Harris, Stacy Meyer, Bertha Minnihan, Kriste Naples-DeAngelo, Kimber Smail, David Torrillo, and Michele Weldon.

The AICPA gratefully acknowledges those members of the AICPA Enhancive Updates Task Force who reviewed or otherwise contributed to the development of the enhancive updates for this edition: Sandi Carrier, Sarah DeVries, Judith Goldberg, and Josie Hammond.

2016 Guide Edition

(Updates to this edition exceeded that of conforming changes.)

AICPA Senior Committees

Auditing Standards Board

Financial Reporting Executive Committee

Ilene Kassman,

ASB Member

Daniel Noll,

FinREC Staff Liaison

Michael J. Santay,

Chair

James Dolinar,

Chair

Gerry Boaz

Aaron Anderson

Dora Burzenski

Muneera Carr

Elizabeth S. Gantnier

Mark Crowley

Steve Glover

Rick Day

Daniel Hevia

Richard Dietrich

Sandra K. Johnigan

Josh Forgione

Ryan Kaye

Gautam Goswami

Marcia Marien

Walter Ielusic

Rich Miller

Matt Kelpy

Dan Montgomery

Steve Moehrle

Steven Morrison

Danita Ostling

Marc Panucci

Robert Owens

Joshua W. Partlow

Bernard Pump

Rick Reisig

Phil Santarelli

Catherine Schweigel

Jay Seliber

Jere G. Shawver

Jeff Sisk

M. Chad Singletary

Brian Stevens

Angela Storm

Mike Tamulis

Jeremy Whitaker

The AICPA gratefully acknowledges those members of the AICPA Employee Benefit Plans Expert Panel who reviewed or otherwise contributed to the development of this edition of the guide: Josephine Hammond (Task Force Chair), Judith Goldberg (Expert Panel Chair), Doug Bertossi, Mark Blackburn, Sandi Carrier, Sarah DeVries, Monique Elliott, Alice Evans, Marilee Lau, David Leising, Bertha Minnihan, Kimber Smail, Deborah Smith, Wendy Terry, Beth Thompson, and Michele Weldon.

The AICPA gratefully acknowledges those members of the AICPA Employee Stock Ownership Plans Task Force who reviewed or otherwise contributed to the development of the new Employee Stock Ownership Plans chapter: Marilee Lau (Task Force Chair), Cindy Dwyer, Josephine Hammond, Sheryl Hessler, Hal Hunt, David Leising, Rebecca Miller, Mark Ritter, Patricia Schmitt, and Deborah Smith. In addition, special thanks to Marilee Lau and Rebecca Miller for their significant additional efforts towards the development of this chapter beyond their roles as task force participants.

AICPA Staff

Linda Delahanty

Senior Manager

Audit and Attest Standards, and

Staff Liaison

to the Employee Benefit Plans Expert Panel and Guide Overhaul Task Force

Diana Krupica

Lead Technical Manager—Public Accounting

Product Management and Development

Guidance Considered in This Edition

This edition of the guide has been modified by the AICPA staff to include certain changes necessary due to the issuance of authoritative guidance since the guide was originally issued, and other revisions as deemed appropriate. Relevant guidance issued through January 1, 2019, has been considered in the development of this edition of the guide. However, this guide does not include all audit, accounting, reporting, and other requirements applicable to an entity or a particular engagement. This guide is intended to be used in conjunction with all applicable sources of relevant guidance.

Relevant guidance that is issued and effective on or before January 1, 2019, is incorporated directly in the text of this guide. Relevant guidance issued but not yet effective as of January 1, 2019, is referenced in a “guidance update” box; that is, a box that contains summary information on the guidance issued but not yet effective.

In updating this guide, all guidance issued up to and including the following was considered, but not necessarily incorporated, as determined based on applicability:

•     FASB Accounting Standards Update (ASU) No. 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors

•     SAS No. 133, Auditor Involvement with Exempt Offering Documents (AU-C sec. 945)

•     Interpretation No. 4, “Reporting on Audits Conducted in Accordance With Auditing Standards Generally Accepted in the United States of America and the Standards of the PCAOB” (AU-C sec. 9700 par. .14–.21)

•     Statement on Standards for Attestation Engagements No. 18, Attestation Standards: Clarification and Recodification (AT-C sections)5

•     Interpretation No. 4, “Performing and Reporting on an Attestation Engagement Under Two Sets of Attestation Standards” (AT-C sec. 9105 par. .31–.35)

•     Statement on Standards for Accounting and Review Services No. 24, Omnibus Statement on Standards for Accounting and Review Services—2018 (AR-C sections)6

•     Statement on Quality Control Standard No. 8, A Firm’s System of Quality Control (Redrafted) (QC sec. 10)7

•     PCAOB Auditing Standard (AS) No. 3101, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion8

•     PCAOB Staff Guidance, Changes to the Auditor’s Report Effective for Audits of Fiscal Years Ending on or After December 15, 2017 (sec. 300.04)

Users of this guide should consider guidance issued subsequent to those items listed previously to determine their effect, if any, on entities and engagements covered by this guide. In determining the applicability of recently issued guidance, its effective date should also be considered.

The changes made to this edition of the guide are identified in appendix J, “Schedule of Changes Made to the Text From the Previous Edition.” The changes do not include all those that might be considered necessary if the guide were subjected to a comprehensive review and revision.

PCAOB quoted content is from PCAOB Auditing Standards and PCAOB Staff Audit Practice Alerts, ©2015, Public Company Accounting Oversight Board. All rights reserved. Used by permission.

FASB standards quoted are from FASB Accounting Standards Codification ©2015, Financial Accounting Foundation. All rights reserved. Used by permission.

FASB ASC Pending Content

Presentation of Pending Content in FASB ASC

Amendments to FASB ASC (issued in the form of ASUs) are initially incorporated into FASB ASC in “pending content” boxes below the paragraphs being amended with links to the transition information. The pending content boxes are meant to provide users with information about how the guidance in a paragraph will change as a result of the new guidance.

Pending content applies to different entities at different times due to varying fiscal year-ends, and because certain guidance may be effective on different dates for public and nonpublic entities. As such, FASB maintains amended guidance in pending content boxes within FASB ASC until the “roll-off” date. Generally, the “roll-off” date is six months following the latest fiscal year end for which the original guidance being amended could still be applied.

Presentation of FASB ASC Pending Content in AICPA Guides

Amended FASB ASC guidance that is included in pending content boxes in FASB ASC on January 1, 2019, is referenced as “Pending Content” in this guide. Readers should be aware that “Pending Content” referenced in this guide will eventually be subjected to FASB’s “roll-off” process and no longer be labeled as “Pending Content” in FASB ASC (as discussed in the previous paragraph).

Terms Used to Define Professional Requirements in This AICPA Audit and Accounting Guide

Any requirements described in this guide are normally referenced to the applicable standards or regulations from which they are derived. Generally, the terms used in this guide describing the professional requirements of the referenced standard setter (for example, the ASB) are the same as those used in the applicable standards or regulations (for example, “must” or “should”). However, where the accounting requirements are derived from FASB ASC, this guide uses “should,” whereas FASB uses “shall.” In its resource document “About the Codification” that accompanies FASB ASC, FASB states that it considers the terms should and shall to be comparable terms and to represent the same concept—the requirement to apply a standard.

Readers should refer to the applicable standards and regulations for more information on the requirements imposed by the use of the various terms used to define professional requirements in the context of the standards and regulations in which they appear.

Certain exceptions apply to these general rules, particularly in those circumstances where the guide describes prevailing and/or preferred industry practices for the application of a standard or regulation. In these circumstances, the applicable senior committee responsible for reviewing the guide’s content believes the guidance contained herein is appropriate for the circumstances.

Applicability of GAAS and PCAOB

Appendix A, “Council Resolution Designating Bodies to Promulgate Technical Standards,” of the AICPA Code of Professional Conduct recognizes both the ASB and the PCAOB as standard setting bodies designated to promulgate auditing, attestation, and quality control standards. Paragraph .01 of the “Compliance With Standards Rule” (ET sec. 1.310.001 and 2.310.001) requires an AICPA member who performs an audit to comply with the applicable standards.

Audits of the financial statements of those entities not subject to the oversight authority of the PCAOB (that is, those audit reports not within the PCAOB’s jurisdiction as defined by the Sarbanes-Oxley Act of 2002, as amended)—hereinafter referred to as nonissuers—are to be conducted in accordance with GAAS as issued by the ASB. The ASB develops and issues standards in the form of SASs through a due process that includes deliberation in meetings open to the public, public exposure of proposed SASs, and a formal vote. The SASs and their related interpretations are codified in AICPA Professional Standards. In citing GAAS and their related interpretations, references generally use section numbers within the codification of currently effective SASs and not the original statement number, as appropriate.

Audits of the financial statements of those entities subject to the oversight authority of the PCAOB (that is, those audit reports within the PCAOB’s jurisdiction as defined by the Sarbanes-Oxley Act of 2002, as amended)—hereinafter referred to as issuers—(for example, plans that are required to file a Form 11-K with the SEC) are to be conducted in accordance with standards established by the PCAOB, a private sector, nonprofit corporation created by the Sarbanes-Oxley Act of 2002. The SEC has oversight authority over the PCAOB, including the approval of its rules, standards, and budget. In citing the auditing standards of the PCAOB, references generally use section numbers within the reorganized PCAOB auditing standards and not the original standard number, as appropriate. See chapter 1 for further information regarding plans pursuant to SEC reporting requirements.

The auditing content in this guide primarily discusses GAAS issued by the ASB and is applicable to audits of nonissuers. Users of this guide may find the tool developed by the PCAOB’s Office of the Chief Auditor helpful in identifying comparable PCAOB standards. The tool is available at https://pcaobus.org/standards/auditing/pages/findanalogousstandards.aspx.

Considerations for audits of issuers in accordance with PCAOB standards may also be discussed within this guide’s chapter text. When such discussion is provided, the related paragraphs are designated with the following title: Considerations for Audits Performed in Accordance With PCAOB Standards. PCAOB guidance included in an AICPA Guide has not been reviewed, approved, disapproved, or otherwise acted upon by the PCAOB and has no official or authoritative status.

AICPA.org Website

The AICPA encourages you to visit its website at www.aicpa.org and the Financial Reporting Center at www.aicpa.org/frc. The Financial Reporting Center supports members in the execution of high-quality financial reporting. Whether you are a financial statement preparer or a member in public practice, this center provides exclusive member-only resources for the entire financial reporting process, and provides timely and relevant news, guidance, and examples supporting the financial reporting process. Another important focus of the Financial Reporting Center is keeping those in public practice up to date on issues pertaining to preparation, compilation, review, audit, attestation, assurance, and advisory engagements. Certain content on the AICPA’s websites referenced in this guide may be restricted to AICPA members only.

Employee Benefit Plan Audit Quality Center

The Employee Benefit Plan Audit Quality Center (EBPAQC) is a firm-based, volunteer membership center of more than 2,600 firms with the goal of promoting quality employee benefit plan audits. The EBPAQC has developed tools and resources to help members recognize and avoid common employee benefit plan audit deficiencies identified by peer reviewers and the DOL. Common EBP Audit Deficiencies and Planning Tool: Summary of Common EBP Audit Deficiencies, Audit Guidance, and Resources (EBPAQC member only), summarizes the most common deficiencies and provides links to audit guidance, and EBPAQC and AICPA tools.

In addition, the EBPAQC broadcasts exclusive member-only live forum webinars on relevant technical topics that are free to members or, for a nominal fee, members can receive CPE for watching the live webinars or rebroadcasts. The EBPAQC also provides timely EAlerts that include information about recent developments affecting employee benefit plan audits; practice management tools and aids intended to help members establish a quality employee benefit plan audit practice; and other audit engagement tools to help members perform quality ERISA audits.

Visit the center website at www.aicpa.org/ebpaqc to see a list of EBPAQC member firms and to preview EBPAQC benefits. For more information, contact the EBPAQC at [email protected].

Risk Assessment — AICPA Enhancing Audit Quality (EAQ) Areas of Focus

Identifying, assessing, and responding to risks of material misstatement are the core of every audit. However, there is evidence that a high percentage of audit engagements do not reflect proper assessment of risk or linkage of the assessment to planned further audit procedures in accordance with AU-C section 315, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement, and AU-C section 330, Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained.

In connection with its EAQ initiative, the AICPA has developed a webpage dedicated to risk assessment resources intended to help auditors perform more effective risk assessment and appropriately link the risk assessment to further audit procedures in compliance with professional standards. Certain resources are available at no cost, including a risk assessment template, an internal inspection aid, and staff training workshop. These and other current risk assessment resources can be accessed at https://www.aicpa.org/content/aicpa/eaq/aicpa-risk-assessment-resources.html.

Select Recent Developments

Revenue From Contracts With Customers

FASB ASC 606, Revenue from Contracts with Customers, provides a framework for revenue recognition and supersedes or amends several of the revenue recognition requirements in FASB ASC 605, Revenue Recognition, as well as guidance within the 900 series of industry-specific topics. The standard applies to any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance or lease contracts).

Because of the nature of single employer employee benefit plans, it would be unlikely for a plan to have revenue from contracts with customers as contemplated by FASB ASC 606. Multiemployer plans may be more likely to generate revenue that would meet the requirements in FASB ASC 606, such as tuition income and book sales.

Accordingly, the guide has not been updated for the FASB ASUs related to FASB ASC 606. Readers are encouraged to consult the full text of these ASUs on FASB’s website at www.fasb.org.

Financial Instruments

In January 2016, FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The global economic crisis further highlighted the need for improvement in the accounting models for financial instruments in today’s complex economic environment. The main objective in developing this ASU is enhancing the reporting model for financial instruments to provide users of financial statements with more decision-useful information.

The amendments in this ASU:

•     supersede the guidance to classify equity securities with readily determinable fair values into different categories (that is, trading or available-for-sale) and require equity securities (including other ownership interests, such as partnerships, unincorporated joint ventures, and limited liability companies) to be measured at fair value with changes in the fair value recognized through net income.

•     simplify the impairment assessment of equity investments without readily determinable fair values by requiring assessment for impairment qualitatively at each reporting period. That impairment assessment is similar to the qualitative assessment for long-lived assets, goodwill, and indefinite lived intangible assets.

•     exempt all entities that are not public business entities from disclosing fair value information for financial instruments measured at amortized cost.

•     require public business entities that are required to disclose fair value of financial instruments measured at amortized cost on the balance sheet to measure that fair value using the exit price notion consistent with FASB ASC 820, Fair Value Measurement.

•     require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option.

Prior to FASB ASU No. 2016-01, FASB ASC 825-10-50 generally required public entities or nonpublic entities with more than $100 million in assets to make certain disclosures related to the fair value of financial instruments not recorded at fair value on the statement of net assets available for benefits.

The required disclosures affected employee benefit plans that are required to file Form 11-K with the SEC, as well as plans with more than $100 million in assets. The disclosures typically related to the fair value of contributions receivable, accrued income, pending trades, and notes payable (for leveraged ESOPs).

One of the amendments in FASB ASU No. 2016-01 was the elimination of the fair value of financial instrument disclosure requirements for all employee benefit plans. The amendments changed the applicability of the disclosure from “Publicly Traded Company” to “Public Business Entity.” Additionally, the amendments added the Master Glossary term public business entity to FASB ASC 825-10-20. The definition of public business entity states neither a not-for-profit entity nor an employee benefit plan is a public business entity. FASB ASU No. 2016-01 clarifies that the fair value of financial instrument disclosures are only required for public business entities.

Given the change in definition, on adoption of FASB ASU No. 2016-01, employee benefit plans are no longer required to make disclosures related to the fair value of financial instruments not recorded at fair value. This disclosure was generally a paragraph added to the fair value measurement disclosures, and, in the case of a leveraged ESOP, a paragraph in the notes payable disclosure.

For public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For all other entities including not-for-profit entities and employee benefit plans within the scope of FASB ASC 960 through 965 on plan accounting, the amendments in this ASU are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019.

FASB ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, was issued in February 2018 to clarify certain aspects of the guidance issued in ASU No. 2016-01. To provide a period of time to allow entities to continue their current adoption plans for ASU No. 2016-01, FASB concluded that for public business entities the amendments in FASB ASU No. 2018-03 are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years beginning after June 15, 2018. Public business entities with fiscal years beginning between December 15, 2017, and June 15, 2018, are not required to adopt these amendments until the interim period beginning after June 15, 2018, and public business entities with fiscal years beginning between June 15, 2018, and December 15, 2018, are not required to adopt these amendments before adopting the amendments in ASU No. 2016-01. For all other entities, the effective date is the same as the effective date in ASU No. 2016-01. All entities may early adopt these amendments for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, as long as they have adopted ASU No. 2016-01.

This edition of the guide has not been updated to reflect changes as a result of the ASUs. Readers are encouraged to consult the full text of the ASUs on FASB’s website at www.fasb.org.

For plans that are not early adopting FASB ASU No. 2017-06, the AICPA is continuing to offer the 2018 edition of the Audit and Accounting Guide Employee Benefit Plans as a resource for requirements prior to the effective date of this ASU.

FASB ASU No. 2017-06, Employee Benefit Plan Master Trust Reporting

In February 2017, FASB issued ASU No. 2017-06, Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting (a consensus of the Emerging Issues Task Force), to improve the usefulness of the information reported to users of employee benefit plan financial statements and to provide clarity to preparers and auditors. ASU No. 2017-06 relates primarily to the reporting by a plan for its interest in a master trust. The amendments clarify presentation requirements for a plan’s interest in a master trust and require more detailed disclosures of the plan’s interest in the master trust. The amendments also eliminate a redundancy relating to 401(h) account disclosures.9

The amendments in this ASU apply to reporting entities within the scope of FASB ASC 960, 962, or 965. They are effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. An entity should apply the amendments in this ASU retrospectively to each period for which financial statements are presented.

This edition of the guide has been updated to reflect changes as a result of this ASU. Readers are encouraged to consult the full text of this ASU on FASB’s website at www.fasb.org. For plans that are not early adopting FASB ASU No. 2017-06, the AICPA is continuing to offer the 2018 edition of the Audit and Accounting Guide Employee Benefit Plans as a resource for requirements prior to the effective date of this ASU.

FASB ASU No. 2018-09, Codification Improvements

In July 2018, FASB issued ASU No. 2018-09, Codification Improvements. The amendments in FASB ASU No. 2018-09 represent changes to clarify, correct errors in, or make minor improvements to FASB ASC. The amendments make FASB ASC easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. FASB ASU No. 2018-09 includes amendments associated with thirty issues that were identified and that affect a wide variety of FASB ASC sections. Several of the issues identified affect specific content in this guide, as follows:

•     Issue 17 — Moving an Indefinite Deferral from the Transition Section to the Disclosure Section in the Codification: This amendment replaces an indefinite deferral of the requirement to disclose information about significant unobservable inputs for plans that hold an investment in securities of the plan sponsor with a disclosure exemption in FASB ASC 820-10-50-2(bbb).

•     Issue 29 — Relocate Guidance to Correct Intersecting Topic in the Codification: This amendment creates FASB ASC 962-360, Plan Accounting—Defined Contribution Pension Plans—Property, Plant and Equipment and moves guidance related the presentation of property, plant and equipment in a defined contribution plan from FASB ASC 962-205-45-5 to FASB ASC 962-360. This changes makes the guidance easier to locate and provides consistency with other FASB ASC topics.

The transition and effective date guidance for the amendments in FASB ASU No. 2018-09 is based on the facts and circumstances of each amendment. Some of the amendments in FASB ASU No. 2018-09 do not require transition guidance and were effective upon issuance. However, many of the amendments do have transition guidance with effective dates for annual periods beginning after December 15, 2018, for public business entities.

This edition of the guide has been updated to reflect changes as a result of this ASU. Readers are encouraged to consult the full text of this ASU on FASB’s website at www.fasb.org.

FASB ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement

In August 2018, FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, to modify the disclosure requirements on fair value measurements in FASB ASC 820, Fair Value Measurement.

The following disclosure requirements were removed from FASB ASC 820:

1.     The amount and reasons for transfers between level 1 and level 2 of the fair value hierarchy.

2.     The policy for timing of transfers between levels.

3.     The valuation processes for level 3 fair value measurements.

4.     For nonpublic entities, the changes in unrealized gains and losses for the period included in earnings for recurring level 3 fair value measurements held at the end of the reporting period.

The following disclosure requirements were modified:

1.     In lieu of a rollforward for level 3 fair value measurements, a nonpublic entity is required to disclose transfers into and out of level 3 of the fair value hierarchy and purchases and issues of level 3 assets and liabilities.

2.     For investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions might lapse only if the investee has communicated the timing to the entity or announced the timing publicly.

3.     The amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date.

The following disclosure requirements were added; however, the disclosures are not required for nonpublic entities:

1.     The changes in unrealized gains and losses for the period included in other comprehensive income for recurring level 3 fair value measurements held at the end of the reporting period.

2.     The range and weighted average of significant unobservable inputs used to develop level 3 fair value measurements.

The amendments in FASB ASU No. 2018-13 are effective for all entities for fiscal years beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance and delay adoption of the additional disclosures until their effective date.

This edition of the guide has not been updated to reflect changes as a result of this ASU, however, affected sections will be updated in a future edition. Readers are encouraged to consult the full text of this ASU on FASB’s website at www.fasb.org.

PCAOB Auditing Standard 3101, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion

In June 2017, the PCAOB adopted a new auditor reporting standard, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion, that replaced portions of AS 3100, Reports on Audited Financial Statements. AS 3101 and related amendments requires the auditor to provide new information about the audit and make the auditor’s report more informative and relevant to investor’s and other financial statement users. The final standard retains the pass/fail opinion of the existing auditor’s report but makes significant changes to the existing auditor’s report. The final standard generally applies to audits conducted under PCAOB standards.

In October 2017, the SEC approved the final standard. The final standard and amendments take effect as follows:

•     All provisions other than those related to critical audit matters take effect for audits of fiscal years ending on or after December 15, 2017; and

•     Provisions related to critical audit matters take effect for audits of fiscal years ending on or after June 30, 2019, for large accelerated filers; and for fiscal years ending on or after December 15, 2020, for all other companies to which the requirements apply.

The new standard allows for early adoption.

This edition of the guide has been updated to reflect changes as a result of this new PCAOB auditor reporting standard. Readers are encouraged to consult the full text of this auditor reporting standard on the PCAOB’s website at www.pcaobus.org.

PCAOB Staff Guidance Changes to the Auditor’s Report Effective for Audits of Fiscal Years Ending on or After December 15, 2017

On December 28, 2017, the PCAOB issued Staff Guidance, Changes to the Auditor’s Report Effective for Audits of Fiscal Years Ending on or After December 1, 2017, which was issued to help firms when implementing changes to the auditor’s report related to AS 3101.

The standard retains the pass/fail opinion of the existing auditor's report but makes significant changes to the report. All of the changes, except those relating to critical audit matters (CAMs), are effective for audits of fiscal years ending on or after December 15, 2017. These changes make a number of improvements that are primarily intended to clarify the auditor's role and responsibilities related to the audit of the financial statements, provide additional information about the auditor, and make the auditor's report easier to read. This guidance addresses these key elements of the revised auditor's report.

The other significant change, auditor communication of CAMs, is permissible on a voluntary basis but will not be required until audits of fiscal years ending on or after June 30, 2019 (for audits of “large accelerated filers”), or December 15, 2020 (for audits of all other companies to which the requirements apply).

Multiemployer Plans

The AICPA issued four new Q&As concerning multiemployer plan payroll compliance services performed in accordance with AT-C section 215, Agreed-Upon Procedures Engagements. The new Q&As are as follows:

•     Q&A section 6935.03, “Multiemployer Plan Payroll Compliance Services — Engagement Letter”

•     Q&A section 6935.04, “Multiemployer Plan Payroll Compliance Services — Representation Letters From Engaging Party”

•     Q&A section 6935.05, “Multiemployer Plan Payroll Compliance Services — Representations Not Obtained From Responsible Parties”

•     Q&A section 6935.06, “Multiemployer Plan Payroll Compliance Services — Use of AUP or Other Reports as Audit Evidence”

Statement on Auditing Standards, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, and Statement on Auditing Standards, Auditor Reporting and Related Amendments

In July 2018, the ASB voted to issue a new auditing standard, Statement on Auditing Standards (SAS), Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA. Although the ASB voted to issue this SAS as a final standard, it was not issued immediately because the ASB was also deliberating proposed SAS Auditor Reporting and Amendments—Addressing Disclosures in the Audit of Financial Statements (Auditor Reporting SAS). The Auditor Reporting SAS was voted as a final standard at the January 2019 ASB meeting and conforming amendments will need to be made to the EBP SAS to align the reporting elements.

This SAS addresses the auditor’s responsibility to form an opinion and report on the audit of financial statements of employee benefit plans subject to ERISA, and the form and content of the auditor’s report issued as a result of an audit of ERISA plan financial statements, including changes to the form and content of the auditor’s report when management elects to have an audit performed pursuant to ERISA section 103(a)(3)(C). This SAS also includes new requirements for engagement acceptance, audit risk assessment and response, communications with those charged with governance, procedures for an ERISA section 103(a)(3)(C) audit, and considerations relating to the Form 5500. For audits of ERISA plan financial statements only, this SAS would apply in place of AU-C section 700, Forming an Opinion and Reporting on Financial Statements, and paragraph .09 of AU-C section 725, Supplementary Information in Relation to the Financial Statements as a Whole. The SAS also would amend various other AU-C sections in AICPA Professional Standards. This SAS should not be adapted for plans that are not subject to ERISA.

When issued, this SAS will be effective for audits of financial statements for periods ending on or after December 15, 2020. Early implementation is not permitted.

This edition of the guide has not been updated to reflect this new SAS. As of February 2019, readers can access a copy of the final balloted draft at www.aicpa.org/content/dam/aicpa/research/exposuredrafts/accountingandauditing/downloadabledocuments/sas-13x-ballot-draft.pdf. This does not represent the final standard and therefore it is important to follow further ASB actions at www.aicpa.org/interestareas/frc/auditattest.html until the standard is finalized. The Standards Tracker provides a quick reference to recently issued audit and attest standards, complete with effective dates, summaries, and links to the standards themselves and can be accessed at www.aicpa.org/interestareas/frc/auditattest/standardstracker-auditandattest.html.

Note: Peer Review of Audits of Employee Benefit Plan Financial Statements

The AICPA peer review board designated certain types of audit engagements of significant public interest as a “must select” engagement. If a firm is conducting these types of engagements, that firm must select at least one of each type for peer review. Employee benefit plan audits are “must select” engagements. As these engagements would be performed under the SASs, these engagements would be subject to peer review and would require the firm to undergo a system review. If a firm has never been peer reviewed and decides to perform an audit of employee benefit plan financial statements (and is required to be enrolled in the AICPA’s peer review program), the due date for this initial peer review is ordinarily eighteen months from the date the firm enrolled in the Program, or should have enrolled, whichever date is earlier. Additionally, a firm may be deemed as failing to cooperate if they omit or misrepresent information relating to its accounting and auditing practice as defined by the AICPA Standards for Performing and Reporting on Peer Reviews. If a firm is dropped or terminated for not accurately representing information relating to its accounting and auditing practice as defined by the AICPA Standards for Performing and Reporting on Peer Reviews, the matter will result in referral to the AICPA Professional Ethics Division for investigation of a possible violation of the AICPA Code of Professional Conduct.

Notes

1

All ET sections can be found in AICPA

Professional Standards

.

2

All AU-C sections can be found in AICPA

Professional Standards

.

3

All Q&A sections can be found in

Technical Questions and Answers

.

4

The term

defined contribution retirement plan

used in this guide is intended to encompass all defined contribution plans (except for health and welfare defined contribution plans that are covered in

chapter 7

, “Health and Welfare Benefit Plans,” of this guide). FASB

Accounting Standards Codification

(ASC) uses the term

defined contribution pension plan.

The authors of this guide believe that, often, the term pension plan is used interchangeably to refer to all types of defined contribution plans. This guide has elected to use the term defined contribution retirement plan because it more accurately reflects all types of defined contribution plans.

5

All AT-C sections can be found in AICPA

Professional Standards

.

6

All AR-C sections can be found in AICPA

Professional Standards

.

7

All QC sections can be found in AICPA

Professional Standards

.

8

All AS sections can be found in

PCAOB Standards and Related Rules

.

9

FASB included the 401(h) simplification within FASB ASU No. 2017-06, however, the assets of the 401(h) do not have to be in a master trust to apply the ASU.

TABLE OF CONTENTS

Chapter

1

Introduction and Background

Introduction

Applicability to Governmental Entities

Background

Defined Contribution Retirement Plans

Employee Stock Ownership Plans

Defined Benefit Pension Plans

Health and Welfare Benefit Plans

Financial Accounting and Reporting for ERISA Plans

Governmental Regulations

Reporting and Disclosure Requirements

Plans Pursuant to the SEC Reporting Requirements

Audit Requirements

Operation and Administration

Accounting Records

2

Planning and General Auditing Considerations

Overview

Categories of Professional Requirements

Interpretive Publications

Quality Control Standards, Including Client Acceptance and Continuance and Engagement Quality Control Reviews

Client Acceptance and Continuance

Engagement Quality Control Review

Audit Scope

Limited-Scope Audit Exemption

Other Applicable Auditing Guidance

Communication With Those Charged With Governance

Engagement Letter

Audit Planning

Coordination of Plan Sponsor and Plan Audits

Considerations for Payroll and Demographic Data

Use of Internal Auditors

Involvement of Professionals Possessing Specialized Skills

Financial Reporting Considerations

Communication and Coordination

Audit Risk

Transactions Processed by Service Organizations

Using the Work of a Specialist

Background

Decision to Use the Work of a Specialist

Related-Party and Party in Interest Transactions

Audit Considerations

Consideration of Laws and Regulations and Prohibited Transactions

Communication With Responsible Parties

Effect on the Auditor’s Report

Accounting Estimates

Going Concern Considerations

Initial Audits of the Plan

3

Audit Risk Assessment

Overview

Audit Risk

Planning Materiality

Performance Materiality

Understanding the Entity and Its Environment, Including Its Internal Control

Risk Assessment Procedures

Discussion Among the Engagement Team

The Entity and Its Environment

The Entity’s Internal Control

Risks Assessment and the Design of Further Audit Procedures

Identifying and Assessing the Risks of Material Misstatement

Use of Assertions in Assessment of Risks of Material Misstatement

Other Risk Assessment Considerations

Designing and Performing Further Audit Procedures

Evaluation of Misstatements Identified During the Audit

Audit Documentation

Consideration of Fraud

Risk Assessment Procedures and Related Activities

Identification and Assessment of the Risks of Material Misstatement Due to Fraud

Evaluation of Audit Evidence

4

Internal Control

Using a Service Organization and Related Audit Considerations

5

Defined Contribution Retirement Plans Including Employee Stock Ownership Plans

5A

Defined Contribution Retirement Plans

Introduction and Background

Administration and Operation of a DC Plan

Accounting, Reporting, and Auditing DC Plans

Financial Statements

Net Assets Available for Benefits

Participant Allocations

Cash Balances

Investments

Participant Loans (Notes Receivable From Participants)

Contributions and Contributions Receivable

Rollover Contributions

Other Receivables

Forfeitures

Operating Assets

Accrued Liabilities

Changes in Net Assets Available for Benefits

Participant Benefits, Distributions, and Withdrawals

Benefit Payments

Plan Expenses

Financial Statement Disclosures

Fair Value Measurement

Derivatives and Hedging

Master Trusts

Financial Instruments

Risks and Uncertainties

403(b) Plans or Arrangements

Plan Transfers (Plan Mergers, Spin-Offs, and Other Transfers)

Going Concern

Terminating Plans (Full and Partial)

Changes in Service Providers

Auditing Considerations for DC Plans

Determining Audit Strategy

Participant Accounts and Allocations

Cash Balances

Investments and Related Income

Notes Receivable From Participants (Participant Loans)

Contributions and Certain Participant Data

Contributions and Contributions Receivable

Rollover Contributions

Other Receivables

Forfeitures

Operating Assets

Accrued Liabilities

Participant Benefits, Distributions and Withdrawals

Plan Expenses

Plan Transfers (Plan Mergers, Spin-Offs, and Other Transfers)

Terminating Plans

Changes in Service Providers

SEC Reporting Requirements

5B

Employee Stock Ownership Plans

Introduction and Background

Participant Allocations

Valuation Terminology

Contributions

Distributions

Voting Rights

Put Option

Diversification

Financing Employer Stock Purchases

Suspense Account (Unallocated Shares)

Share Release Formula

Debt Service Payment

Administration and Operation of an ESOP

Regulatory Reporting Requirements

Accounting, Reporting, and Auditing ESOPs

Financial Statements

Net Assets Available for Benefits

Allocations

Cash Balances

Investments

Valuation Techniques

Participant Loans

Contributions and Contributions Receivable

Rollover Contributions

Other Receivables

Forfeitures

Leveraged ESOP Debt

Accrued Liabilities

Other Liabilities

Changes in Net Assets Available for Benefits

Participant Benefits, Distributions, and Withdrawals

Plan Expenses

Financial Statement Disclosures

Fair Value Measurement

Financial Instruments

Risks and Uncertainties

Subsequent Event Considerations for ESOPs

Prohibited Transactions and Party in Interest Transactions

Plan Transfers (Plan Mergers, Spin-Offs, and Other Transfers)

Going Concern

Terminating Plans (Full and Partial)

Changes in Service Organization

Auditing Considerations for ESOPs

Determining Audit Strategy

Valuation Terminology

Risk Assessment Considerations

Participant Accounts and Allocations

Cash Balances

Investments and Related Income

Limited-Scope Auditing Considerations

Contributions and Certain Participant Data

Contributions and Contributions Receivable

Rollover Contributions

Forfeitures

Leveraged ESOP Debt and Interest Expense

Accrued Liabilities

Other Liabilities — Employer Advances

Participant Benefits, Distributions and Withdrawals

Floor Price Protection

Plan Expenses

Plan Mergers and Spin-offs

Terminating Plans (Full and Partial) or Frozen Plans

Changes in Service Providers

Appendix A — Defined Contribution Retirement Plans

Appendix B — Regulations, Administration, and Operation of an ESOP

6

Defined Benefit Pension Plans

Introduction and Background

Administration and Operation of a DB Plan

Accounting, Reporting, and Auditing DB Plans

Financial Statements

Net Assets Available for Benefits

Cash Balances

Investments

Contributions and Contributions Receivable

Other Receivables

Operating Assets

Accrued Liabilities

Changes in Net Assets Available for Benefits

Benefit Payments

Plan Expenses

Accumulated Plan Benefits

Changes in Accumulated Plan Benefits

Financial Statement Disclosures

Fair Value Measurement

Derivatives and Hedging

Master Trusts

Financial Instruments

Risks and Uncertainties

Plan Transfers (Plan Mergers, Spin-Offs, and Other Transfers)

Going Concern

Terminating Plans (Full or Partial) and Frozen Plans

Terminating Plans

Frozen Plans

Changes in Service Providers

Auditing Considerations for DB Plans

Determining Audit Strategy

Cash Balances

Investments and Related Income

Contributions and Contributions Receivable

Other Receivables

Operating Assets

Accrued Liabilities

Benefit Payments

Plan Expenses

Accumulated Plan Benefits and Participant Census Data

Plan Transfers (Plan Mergers, Spin-Offs, and Other Transfers)

Terminating Plans (Full or Partial) or Frozen DB Plans

Changes in Service Providers

Appendix A — Defined Benefit Pension Plan Operations and Administration

7

Health and Welfare Benefit Plans

Introduction and Scope

Trust Arrangements

Defining the Reporting Entity

Background

Administration of a Health and Welfare Benefit Plan

HIPAA Considerations

Annual Health Care Process

Health and Welfare Arrangements

Accounting, Reporting, and Auditing for H&W Plans

Financial Statements

Defined Benefit H&W Plan

Defined Contribution H&W Plan

Net Assets Available for Benefits

Cash

Investments

401(h) Accounts

Contributions and Contributions Receivable

Other Receivables

Deposits With and Receivables From Insurance Companies and Other Service Providers

Operating Assets

Accrued Liabilities

Changes in Net Assets Available for Benefits

Benefit Payments

Insurance Premiums

Plan Expenses

Benefit Obligations

Claims

Premiums Due Under Insurance Arrangements

Accumulated Eligibility Credits

Postemployment Benefits

Postretirement Benefit Obligations

Changes in Benefit Obligations

Financial Statement Disclosures

Fair Value Measurement

Derivatives and Hedging

Financial Instruments

Risks and Uncertainties

Plan Transfers (Plan Mergers, Spin-Offs, and Other Transfers)

Going Concern

Terminating Plans

Terminating Trusts

Tax Considerations

Changes in Service Providers

Auditing Considerations for H&W Plans

Determining Audit Strategy

Confidentiality or Indemnification Agreements

Cash Balances

Investments and Related Income

Contributions and Contributions Receivable

Other Receivables

Deposits With, and Receivables From, Insurance Companies and Other Service Providers

Operating Assets

Accrued Liabilities

Benefit and Claim Payments

Insurance Premiums

Plan Expenses

Benefit Obligations—Defined Benefit H&W Plans

Defined Contribution H&W Plans

Plan Transfers (Plan Mergers, Spin-Offs, and Other Plan Transfers)

Terminating Plans or Frozen H&W Plans

Changes in Service Providers

Appendix A — The Annual Health Care Process

Appendix B — Examples of Health and Welfare Arrangements

Appendix C — Risk Assessment and Internal Control Considerations—Claim Payments

8

Investments

Introduction

Background

Investment Activities and the Use of Service Organizations

The Investment Manager or Adviser

The Custodian

The Trustee (Directed and Discretionary)

Investment Recordkeeper

Valuation of Investments

Fair Value Measurement

Definition of

Fair Value

Definition of

Readily Determinable Fair Value

Valuation Techniques

The Fair Value Hierarchy

Considerations When Determining Fair Value

Fair Value Disclosures

Accounting and Disclosure for Investments

Statement of Net Assets Available for Benefits

Statement of Changes in Net Assets Available for Benefits

RICs (Mutual Funds)

Investments in CCTs

Master Trust Arrangements

Other Investments

Private Investment Funds

Separately Managed Accounts

Investments Reported as 103-12 Entities as Required by the DOL

Contracts With Insurance Entities

DA Contracts

IPG Contracts

Other Investment Arrangements With Insurance Entities

Derivatives and Hedging Activities

Offsetting of Derivatives, Repurchase Agreements, and Securities Lending Transactions

Securities Lending Arrangements

Financial Statement Disclosures

Insurance Contracts

Fair Value Measurements

Financial Instruments

Risks and Uncertainties

Master Trusts

Derivatives and Hedging Activities

Securities Lending

Auditing Considerations for Investments

Risk Assessment and Internal Control Considerations for Investments

Determining Audit Strategy

Investments and Related Income

Audit Procedures for Certain Plan Investments

Investments in Securities That Are Valued Based on the Investee’s Financial Results

Limited-Scope Auditing Procedures

9

Plan Tax Status

Nondiscrimination and Other Operating Tests for Plan Qualification

Unrelated Business Taxable Income

Income Taxes

Auditing Considerations

Relevant Assertions

Examples of Identified Risks of What Can Go Wrong at the Relevant Assertion Level

Example Audit Procedures to Consider

10

Concluding the Audit and Other Auditing Considerations

The Form 5500

Reports Issued Prior to the Form 5500 Filing

Commitments and Contingencies

Litigation, Claims, and Assessments

Subsequent Events

Evaluating the Risk of Material Misstatement Due to Fraud at or Near the End of the Audit

Plan Representations

Management Representation Letter

Communications With Those Charged With Governance

Significant Findings From the Audit

Communicating Internal Control Related Matters Identified in an Audit

DOL Access to Auditors’ Working Papers

11

The Auditor’s Report

What This Chapter Provides

Background

Forming an Opinion

Addressing the Auditor’s Report

Dating of the Auditor’s Report

Content of the Auditor’s Report

Supplemental Schedules Relating to ERISA and DOL Regulations (Full-Scope Audits for Nonissuers)

Full-Scope Audit Considerations

Unmodified Opinions—Defined Contribution Retirement Plans

401(k) Plan (U.S. GAAP)

401(k) Plan—Special Purpose Framework

Unmodified Opinions—Defined Benefit Pension Plans

Illustration of Auditor’s Report on Financial Statements of Defined Benefit Pension Plan Assuming End-of-Year Benefit Information Date

Illustration of Auditor’s Report on Financial Statements of DB Plan Assuming Beginning-of-Year Benefit Information Date

Unmodified Opinion—Health and Welfare Benefit Plans

Unmodified Opinion—Reporting on the Financial Statements of a Trust

Unmodified Opinion—Form 11-K Filings With the SEC

Form 11-K Audit Report for Filing With the SEC

Form 11-K Audit Report for Filing With the DOL

Full-Scope Audits—Unmodified Opinions on the Financial Statements With Modifications to the Report on Supplementary Information

Departures From, or Omission of, Supplementary Information Required by the DOL

Omitted Information in a Schedule Required Under DOL Regulations

Omitted Schedule Required Under DOL Regulations

Qualified Report on Supplementary Information—Omitted Information

Prohibited Transactions

Qualified Report—Disclosure of Material Prohibited Transaction With Party in Interest Omitted

Disclosure of Immaterial Prohibited Transaction With Party in Interest Omitted

Prohibited Transaction With Party in Interest That Is Also Considered a Related-Party Transaction

Limited-Scope Audits Under DOL Regulations

Reporting on Supplemental Schedules—Limited-Scope Audit Considerations

Standard Limited-Scope Audit Report

Limited-Scope Audit in Prior Year

Limited-Scope Audit in Current Year

Limited-Scope Audit in Current Year, Prior Year Limited-Scope Audit Performed by Other Auditors

Change in Trustee

Reporting on Supplemental Schedules in a Limited-Scope Audit

Standard Limited-Scope Audit Reports With Modifications to the Report on Supplemental Schedules

Omitted Schedule Required Under DOL Regulations in a Limited-Scope Engagement

Modified Opinion on Supplemental Schedules—Omitted Information Required Under DOL Regulations in a Limited-Scope Engagement

Other Scope Limitations

Disclaimer of Opinion on Audit of Multiemployer Pension Plan Due to Scope Limitation

Accumulated Plan Benefits—GAAP Departures and Changes in Accounting Estimates

Terminating Plans

Substantial Doubt With Respect to Going Concern

Initial Audits of Plans

Prior Period Financial Statements Not Audited

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

EULA

Guide

Cover

Table of Contents

Preface

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