Employee Benefit Plans Audit Update 2009

By Jason D. Newman, CPA, Member, CSCPA Employee Benefit Plans Special Interest Group

Since January, the AICPA, CSCPA, and those performing audits of employee benefit plans have been busy with various learning programs. The AICPA Employee Benefit Plan Audit Quality Center (EBPAQC) hosted the following “Live Forum and Roundtable Calls” to help members get ready for the benefit plan audit season:

  • FAS 157 Implications to Employee Benefit Plans – January 7, 2009
  • SAS No. 115, Communicating Internal Control Related Matters Identified in an Audit – January 20, 2009
  • Managers and In-Charges Planning – January 22, 2009
  • Planning for the 2009 EBP Audit Season for Designated Partner – February 3, 2009
  • 11-K Audits – March 26, 2009
  • Limited Scope Audits – April 21, 2009

These live forums continue to provide useful, timely information and are archived on the EBPAQC’s website at http://ebpaqc.aicpa.org.

On April 22, 2009, the CSCPA Employee Benefit Plans Special Interest Group continued the tradition of hosting a seminar featuring Ian Dingwall, chief accountant of the Department of Labor (DOL) Employee Benefit Security Administration. Lastly, the AICPA hosted the National Conference on Employee Benefit Plans on May 18-20, 2009.

All of these programs continue to focus on improving plan audit quality and ensuring that auditors are aware of the most recent developments. This article gives an update on the “hot topics” discussed during these programs.

FAS 157 Implications to Employee Benefit Plans – January 7, 2009 EBPAQC Live Forum:

The live forum focused on the fair value measurements for assets and liabilities in employee benefit plans. The topics for this forum included:

  • Definition of fair value and expansion of disclosures
  • Inputs for determining market value including “observable” and “unobservable”
  • Three-tier hierarchy for categorizing assets or liabilities
  • Plan sponsor responsibilities
  • Principles-based approach (which requires judgment)
  • Service providers’ interaction with plan sponsors
  • Practice aids and tools provided by EBPAQC.

SAS No. 115, Communicating Internal Control Related Matters Identified in an Audit – January 20, 2009 EBPAQC Live Forum:

While the live forum was not focused on employee benefit plans, it did discuss a topic that is applicable to all audits – communicating with clients (those charged with governance) regarding the internal-control-related matters first covered in SAS 112. SAS 115 replaces SAS 112 and provides a change of the definition for significant deficiency and material weakness. This SAS also revises the list of deficiencies that indicate the possibility of a material weakness, a list of deficiencies that would be considered least significant, and illustrative communications.

Managers and In-Charges Planning – January 22, 2009 EBPAQC Live Forum:

Continuing their efforts to provide timely information, the EBPAQC hosted this forum to focus on managers and in-charges overseeing plan audits. These topics included:

  • A roundtable discussion of audit planning, which discussed the current state of the economy, expectations for 2008 audits brain- storming as a team, communications with those charged with governance, new pronouncements, and changes to the Form 5500
  • FAS 157
  • Regulatory update including 403(b) plans, Form 5500 changes, SAS 99 and fraud considerations, and communications with those charged with governance
  • Common audit deficiencies from DOL and peer review findings
  • New EBPAQC tools.

Planning for the 2009 EBP Audit Season – February 3, 2009 EBPAQC Live Forum:

This live forum was designed for firm designated partners and focused on preparing firms for 2009 audits, giving helpful best practices for managing a firm’s ERISA audit practice and stressing audit quality. The topics of this forum were:

  • An executive-level focus for designated partners on key issues facing the employee benefit audit practice, including continued DOL and peer review monitoring of audits and auditor independence
  • Client acceptance and continuance procedures and preparation for 2009 ERISA audits by updating your firm’s resource library (new AICPA guide, Audit Risk Alert, SAS 70 checklists, and other useful tools), reviewing prior-year internal inspection reports and latest external inspection reports, revising audit programs, and being aware of the regulatory developments that could affect the procedures performed in the current-year audit
  • Updating the firm’s quality control procedures effective with SQCS No. 7, effective January 1, 2009
  • FAS 157
  • Improvement over year one of the Risk Assessment Standards
  • Economic considerations and legislation.

11-K Audit Live Forum – March 26, 2009 EBPAQC Live Forum:

This discussion focused on basic components for 2009 audits of registrants required to file their employee benefit plan audit with the Securities and Exchange Commission. These were:

  • Identifying practice issues related to 11-K audits, including the filing requirements associated with the registrant (Form S-8, Form 11-K, and consents). Discussion also took place regarding the filing due dates, financial statement format, independence rules, partner rotation, and prohibited services
  • PCAOB audit standards and considerations
  • Comment letters
  • Engagement quality control reviews
  • Communication responsibilities
  • PCAOB inspections and reporting
  • Resources.

Limited-Scope Audits – March 26, 2009 EBPAQC Live Forum:

This live forum gave the basics for performing limited scope audits under DOL regulations and an in-depth discussion of the common areas of concern. The following topics were discussed:

  • Definition of a limited-scope audit
  • History of the limited-scope audit
  • Common types of plan investments
  • Changes in procedures relative to alternative investments
  • Differences between limited- and full- scope audits and auditor responsibility
  • Q&A session for common auditor inquiries.

AICPA National Conference on Employee Benefit Plans – May 18-20, 2009:

The national conference was held in Orlando, Florida this year. While Orlando sounds great, the conference took place during the first three days of Florida’s torrential downpours and flooding!

The conference opened with a discussion of the changing environment in the benefit plan industry, and comments from the members of the Employee Benefits Security Administration division of the DOL and many others.

During the remainder of the conference, there were a series of break-out sessions covering topics such as: FAS 157, ERISA 4013(b) audits and the 403(b) landscape, year two of applying the risk assessment standards, auditing plan fees, first-year audit considerations, equity-based compensation, auditing investments, health and welfare plan issues, DOL findings, new EFAST 2 system, client communications, fraud brainstorming, an update on 409A, tax technical resource panel, developing accounting and auditing standards, and the AICPA Audit Risk Alert: Employee Benefit Plans Industry Developments – 2009.

Needless to say, there continues to be an abundance of topics and sessions packed into this conference. One item of special interest was the highlights of the audit risk alert and items to consider for the 2009 audit of plan year 2008.

The audit risk alert has helpful information related to current legislative and industry developments, audit issues, resources for additional guidance, and, among other items, a section devoted to commonly asked questions regarding issues that arise during audits.

As auditors begin their planning process for 2009, the audit risk alert points out common audit concerns that the practitioner should consider. These include:

  • An understanding of the plan and its environment
  • Current economic and industry developments (including the current economic crisis)
  • Fair value measurements and disclosures
  • ERISA 403(b) plans and the new filing and audit requirements
  • Client acceptance and continuance procedures
  • Legislation under the Pension Protection Act and other legislation from 2008
  • Actuarial reports
  • 11-K audits (including recent PCAOB pronouncements and related guidance)
  • FASB Codification and recent auditing and attestation pronouncements
  • Electronic filing of the 2009 Form 5500
  • Correction programs and DOL outreach programs
  • Employee benefit plan resources.

The full text of the risk alert and information related to the national conference can be found at the AICPA’s website at www.aicpa.org. Reading the audit risk alert is an integral part of the planning process and is a companion to the Audit and Accounting Guide.

Ask the DOL – April 22, 2009 CSCPA Employee Benefit Plans Special Interest Group

Lastly, I would like to focus on comments from Ian Dingwall, chief accountant of the DOL Employee Benefit Security Administration. As discussed above, the DOL continues to focus on review of audit working papers and the quality of those audits. In addition to its study of audit firms, the DOL continues to have a heightened awareness of compliance issues affecting employee benefit plans: most commonly, the timely remittance of employee contributions and other prohibited transactions.

During discussions at both the “Ask the DOL” session sponsored by the CSCPA Employee Benefit Plans Special Interest Group and at the AICPA National Conference, the DOL acknowledged that reporting late remittances by plan auditors has been a challenge due to the “areas of grey” in interpreting the rule for timely remittance. While there has been proposed guidance for small plans related to a “bright line” test for remittances, the guidance for large plan filers (those we are auditing) is yet to be seen.

Additional discussions focused on changes to certain voluntary correction programs, the economy, and additional hot topics. Please contact CSCPA CPE Director Lisa Bugryn at lisab@cscpa.org or 860-258-4800, ext. 232 if you are interested in obtaining speaker presentation materials.


The employee benefit plan audit area continues to evolve and a focus on audit quality by the AICPA and DOL will continue to drive new rules, regulations, and how we practice as specialists. As new developments arise, the CSCPA Employee Benefit Plans Special Interest Group will continue to inform the CSCPA members.

For further information and guidance on the issues described above, the following sources can be consulted: AICPA Audit Risk Alert: Employee Benefit Plans Industry Developments – 2009, AICPA Audit and Accounting Guide – Audits of Employee Benefit Plans, and the AICPA Trends and Techniques for Employee Benefit Plans at www.aicpa.org, the Internal Revenue Service website at www.irs.gov, and the DOL website at www.dol.gov/ebsa.  

Jason D. Newman, CPA is a member of the firm at Kostin, Ruffkess & Company, LLC specializing in audits of employee benefit plans. Newman is a member of the CSCPA Employee Benefit Plans Special Interest Group, serves on the Pension Special Interest Group through the firm’s nationwide affiliation with the Leading Edge Alliance, and is a member of the Northeast Pension Liaison Group and a board member of the Connecticut Public Pension Forum. He can be reached directly at 860-678-6059 or via email at jnewman@kostin.com.