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SAS No. 136: Changes to audits of employee benefit plans

November 10, 2021 / 4 min read

The AICPA Auditing Standards Board issued a Statement on Auditing Standards No. 136. Learn more about what the new requirements mean for employee benefit plan sponsors.

Employee benefit plan sponsors will want to take note. The AICPA Auditing Standards Board (ASB) has issued Statement on Auditing Standards (SAS), which addresses certain new performance and reporting requirements for audits of employee benefit plans (EBP) subject to ERISA. The new statement, SAS No. 136, also makes significant changes to the form and content of the auditor’s report.

This alert focuses on the new requirements for employee benefit plan sponsors of SAS No. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to Employee Retirement Income Security Act of 1974 (ERISA).

SAS No. 136 overview

The EBP SAS is intended to improve audit transparency while enhancing the auditor reporting model for audits of ERISA plan financial statements by taking the specialized nature of plan operations into consideration. 

Effective date

The original effective date of the EBP SAS was for periods ending on or after Dec. 15, 2020. However, the ASB voted to delay the effective date, and the new effective date is for plan financial statements for periods ending on or after Dec. 15, 2021.

Audit firms can elect to early adopt the EBP SAS as of the original effective date. Plante Moran has elected to implement the EBP SAS as of the new effective date — that is, for periods ending on or after Dec. 15, 2021.

Changes to audit report and engagement letter

SAS 136 clarifies plan management and auditor responsibilities; some of which are now included in the auditor’s report and engagement letter.

Management’s responsibility to maintain a plan instrument, including all plan amendments, to administer the plan and maintain sufficient records for plan transactions as well as management’s responsibility for the financial statements will be included in the audit engagement letter.

The goal of these changes is to clarify management’s role and responsibilities throughout the audit process. 

What impact can plan sponsors expect?

Plan sponsors and management of benefit plans subject to ERISA can expect changes related to management responsibilities, the audit report, communications, and inquiries and procedures. Let’s take a look.

Management responsibilities under SAS No. 136

As part of the ERISA section 103(a)(3)(C) audit, plan sponsors will have the additional responsibilities to:

Plan sponsors should maintain documentation of this assessment. Additionally, the certification should be in good form—that is, signed by an authorized representative with certification of both accuracy and completeness.

Audit report changes under SAS No. 136

Plan sponsors will notice that the audit report will look significantly different once the EBP SAS has been implemented. One of the objectives of SAS 136 is to provide readers with a better understanding of the scope of the audit and to make clear the responsibilities of the plan sponsor (as mentioned above) and the auditor.

The EBP SAS will allow plan sponsors to elect to have an ERISA section 103(a)(3)(C) audit, which will no longer be referred to as a “limited scope audit.”

The audit opinion of an ERISA section 103(a)(3)(C) audit will include information on the procedures performed on both certified and noncertified information as well as a new basis for opinion section.

The audit report is intended to be more transparent as to plan sponsor and auditor responsibilities, regardless of whether an ERISA section 103(a)(3)(C) audit or a non-ERISA section 103(a)(3)(C), formerly referred to as “full scope,” audit is performed.

Communications under SAS No. 136

The EBP SAS requires the auditor to communicate, in writing, reportable findings, including identified or suspected noncompliance, to plan management and those charged with governance.

Plan sponsors should be aware that reportable findings include one or more of the following:

Inquiries and procedures under SAS No. 136

In addition to the inquiries and procedures surrounding the evaluation of the certification statement, plan sponsors and management should also expect:

SAS 136 plan sponsor impacts in summary

The adoption of SAS 136 will require advanced planning and coordination among the plan sponsor, the auditor, and the Form 5500 preparer throughout the audit process. If plan sponsors elect an ERISA section 103(a)(3)(C) audit, they will need to ensure coordination with the qualified institution.

Additionally, it will be important for plan sponsors to be aware of and provide the additional documentation the auditor will request to perform the ERISA section 103(a)(3)(C) audit.

Plan sponsors can see the full EBP SAS for more information as well as tools provided by the AICPA Employee Benefit Plan Audit Quality Center, designed to assist plan management in assessing whether the conditions for electing an ERISA Section 103(a)(3)(C) audit have been met.

If you have any questions about SAS 136 or electing an ERISA Section 103(a)(3)(C) audit, feel free to reach out — we’re happy to help.

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