With Several SASs Put to Bed, Seven More Standards Await

As this column was being written, many employee benefit plan auditors, plan administrators, plan actuaries, and Form 5500 preparers were approaching the extended Form 5500 filing deadline (Oct. 17, 2022). A common topic on everyone’s mind this employee benefit plan audit season was the implementation of Statement on Auditing Standards (SAS) No. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans, in addition to SAS Nos. 134, 135, and 137-141. In short, SAS No. 136 contains a new reporting model for audits of plans subject to the Employee Retirement Income Security Act (ERISA), as well as incremental performance requirements for those audits. It also creates the new AU-C Section 703 in the AICPA Professional Standards. Since many of the amendments in SAS Nos. 134-141 are interrelated, the Auditing Standards Board (ASB) of the AICPA recommended that they be implemented concurrently. SAS No. 141, Amendment to the Effective Dates of SAS Nos. 134-140, amended the effective date of these standards to periods ending on or after Dec. 15, 2021, with early implementation permitted. As is human nature, many did not adopt early, so this employee benefit plan audit season was filled with preparation for, communication about, and implementation of the new standards. We dealt with getting our heads around new concepts such as “relevant plan provisions,” “substantially complete Form 5500,” “ERISA Section 103(a)(3)(C) audit,” and “reportable findings.” We also dealt with the challenge of educating plan administrators and those charged with governance of the responsibilities being shifted to them.  

While we were implementing SAS Nos. 134-141, the Audit Quality Study of the Employee Benefit Security Administration (EBSA) of the Department of Labor (DOL) was looming in the background. In 2021, the DOL announced that it would conduct a new audit quality study based on plan year 2020 Form 5500 filings. The study was conducted throughout 2022, with a formal report expected by the end of the year. The study is expected to set a baseline on audit quality, as most of these audits will be performed under auditing standards prior to the adoption of SAS No. 136. The DOL expects to perform another study sometime after the adoption of SAS No. 136 to see if audit quality improved as a result of the new standards. At this time, the DOL has not announced the timing, criteria, or other specifics for the next round of selections of the Audit Quality Study. 

With all these implementations out of the way, does that mean employee benefit plan auditors can all kick back and relax after Oct. 17, 2022, and put our audits on cruise control? The answer to that is a resounding, “No!” While we were focused on implementation, the ASB was busy issuing seven new standards from June through August 2022. These standards are in response to the ongoing Enhancing Audit Quality (EAQ) project of the AICPA. The EAQ project is an initiative that began in 2014 to promote high-quality auditing and assurance, with a focus on subject matter that has created challenges for practitioners. As a result, getting up to speed on a whole new set of guidance is on the horizon. We now need to keep our eyes on the following: 

• SAS No. 142, Audit Evidence (AU-C Section 500), is effective for audits of financial statements for periods ending on or after Dec. 15, 2022. 
• Three standards effective for audits of financial statements for periods ending on or after Dec. 15, 2023, include the following:
  • SAS No. 143, Auditing Accounting Estimates and Related Disclosures (AU-C sec. 540)
  • SAS No. 144, Amendments to AU-C Sections 501, 540, and 620 Related to the Use of Specialists and the Use of Pricing Information Obtained from External Information Sources
  • SAS No. 145, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement  

• SAS No. 146, Quality Management for an Engagement Conducted in Accordance with Generally Accepted Auditing Standards (AU-C Section 220), is effective for audits of financial statements for periods beginning on or after Dec. 15, 2025.
• SAS No. 147, Inquiries of the Predecessor Auditor Regarding Fraud and Noncompliance with Laws and Regulations, is effective for audits of financial statements for periods beginning on or after June 30, 2023.
• SAS No. 148, Amendment to AU-C Section 935 (Compliance Audits), has a two-tiered effective date. The amendment relating to AU-C Section 501 in the appendix, “AU-C Sections That Are Not Applicable to Compliance Audits,” is effective for compliance audits for fiscal periods ending on or after Dec. 15, 2022, consistent with the effective date of SAS No. 142. All other amendments are effective for compliance audits for fiscal periods ending on or after Dec. 15, 2023, consistent with the effective date of SAS No. 145.  

These standards may appear general in nature, but their applicability cannot be overlooked. How we evaluate and document audit evidence, estimates, risk assessments, quality management, and other requirements continuously evolve.