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Employee Benefit Plans, 2019

AICPA

ISBN: 978-1-948-30675-1 June 2019 928 Pages

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Description

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)

1 Introduction and Background .01-.37

Introduction .01-.07

Background .08-.12

Financial Accounting and Reporting for ERISA Plans .13-.21

Audit Requirements .22-.24

Operation and Administration .25-.34

Accounting Records .35-.37

2 Planning and General Auditing Considerations .01-.142

Overview .01-.10

Quality Control Standards, Including Client Acceptance and Continuance and Engagement Quality Control Reviews .11-.18

Audit Scope .19-.38

Engagement Letter .39-.43

Audit Planning .44-.62

Audit Risk .63

Transactions Processed by Service Organizations .64

Using the Work of a Specialist .65-.94

Related-Party and Party in Interest Transactions .95-.116

Audit Considerations 106-.116

Consideration of Laws and Regulations and Prohibited Transactions .117-.128

Accounting Estimates .129-.130

Going Concern Considerations .131-.133

Initial Audits of the Plan .134-.142

3 Audit Risk Assessment .01-.71

Overview .01

Audit Risk .02-.06

Planning Materiality .07-.11

Understanding the Entity and Its Environment, Including Its Internal Control .12-.29

Risks Assessment and the Design of Further Audit Procedures .30-.49

Evaluation of Misstatements Identified During the Audit .50-.53

Audit Documentation .54-.55

Consideration of Fraud .56-.71

4 Internal Control .01-.28

Using a Service Organization and Related Audit Considerations .11-.28

5 Defined Contribution Retirement Plans Including Employee Stock Ownership Plans .01-.801

5A Defined Contribution Retirement Plans .01-[.399]

Introduction and Background .01-.05

Administration and Operation of a DC Plan .06-.08

Accounting, Reporting, and Auditing DC Plans .09-.10

Financial Statements .11-.12

Net Assets Available for Benefits .13-.67

Changes in Net Assets Available for Benefits .68-.76

Financial Statement Disclosures .77-.96

403(b) Plans or Arrangements .97-.100

Plan Transfers (Plan Mergers, Spin-Offs, and Other Transfers) .101-.105

Going Concern .106

Terminating Plans (Full and Partial) .107-.114

Changes in Service Providers .115-[.199]

Auditing Considerations for DC Plans .200-[.399]

5B Employee Stock Ownership Plans .400-[.799]

Introduction and Background .400-.421

Administration and Operation of an ESOP .422-.423

Regulatory Reporting Requirements .424

Accounting, Reporting, and Auditing ESOPs .425-.426

Financial Statements .427-.429

Net Assets Available for Benefits .430-.461

Changes in Net Assets Available for Benefits .462-.473

Financial Statement Disclosures .474-.492

Plan Transfers (Plan Mergers, Spin-Offs, and Other Transfers) .493

Going Concern .494

Terminating Plans (Full and Partial) .495-.501

Changes in Service Organization .502-[.599]

Auditing Considerations for ESOPs .600-[.799]

Appendix A—Defined Contribution Retirement Plans .800

Appendix B—Regulations, Administration, and Operation of an ESOP .801

6 Defined Benefit Pension Plans .01-.207

Introduction and Background .01-.04

Administration and Operation of a DB Plan .05-.07

Accounting, Reporting, and Auditing DB Plans .08-.11

Financial Statements .12-.15

Net Assets Available for Benefits .16-.71

Changes in Net Assets Available for Benefits .72-.78

Accumulated Plan Benefits .79-.93

Changes in Accumulated Plan Benefits .94

Financial Statement Disclosures .95-.116

Plan Transfers (Plan Mergers, Spin-Offs, and Other Transfers) .117-.122

Going Concern .123

Terminating Plans (Full or Partial) and Frozen Plans .124-.135

Changes in Service Providers .136

Auditing Considerations for DB Plans .137-.207

7 Health and Welfare Benefit Plans .01-.240

Introduction and Scope .01-.11

Background .12-.17

Health and Welfare Arrangements .18-.25

Financial Statements .26-.31

Net Assets Available for Benefits .32-.77

Changes in Net Assets Available for Benefits .78-.90

Benefit Obligations .91-.127

Changes in Benefit Obligations .128-.129

Financial Statement Disclosures .130-.147

Plan Transfers (Plan Mergers, Spin-Offs, and Other Transfers) .148-.149

Going Concern .150

Terminating Plans .151-.160

Terminating Trusts .161-.162

Tax Considerations .163-.168

Changes in Service Providers .169

Auditing Considerations for H&W Plans .170-.237

Appendix A—The Annual Health Care Process .238

Appendix B—Examples of Health and Welfare Arrangements .239

Appendix C—Risk Assessment and Internal Control Considerations—Claim Payments .240

8 Investments .01-.172

Introduction .01-.02

Background .03-.14

Valuation of Investments .15-.16

Fair Value Measurement .17-.35

Accounting and Disclosure for Investments .36-.38

RICs (Mutual Funds) .39

Investments in CCTs .40-.42

Master Trust Arrangements .43-.46

Other Investments .47-.50

Contracts with Insurance Entities .51-.66

Derivatives and Hedging Activities .67-.77

Securities Lending Arrangements .78-.82

Financial Statement Disclosures .83-.94

Auditing Considerations for Investments .95-.172

Audit Procedures for Certain Plan Investments .128-.161

Investments in Securities That Are Valued Based on the Investee’s Financial Results .162-.164

Limited-Scope Auditing Procedures .165-.172

9 Plan Tax Status .01-.31

Nondiscrimination and Other Operating Tests for Plan Qualification .12-.14

Unrelated Business Taxable Income .15-.20

Income Taxes .21-.25

Auditing Considerations .26-.31

10 Concluding the Audit and Other Auditing Considerations .01-.40

The Form 5500 .03-.08

Commitments and Contingencies .09-.13

Subsequent Events .14

Evaluating the Risk of Material Misstatement Due to Fraud at or Near the End of the Audit .15

Plan Representations .16-.22

Communications with Those Charged With Governance .23-.35

Communicating Internal Control Related Matters Identified in an Audit .36-.39

DOL Access to Auditors’ Working Papers .40

11 The Auditor’s Report .01-.91

What This Chapter Provides .03-.05

Background .06-.17

Supplemental Schedules Relating to ERISA and DOL Regulations (Full-Scope Audits for Nonissuers) .18-.24

Unmodified Opinions—Defined Contribution Retirement Plans .25-.34

Unmodified Opinions—Defined Benefit Pension Plans .35-.36

Unmodified Opinion—Health and Welfare Benefit Plans .37

Unmodified Opinion—Reporting on the Financial Statements of a Trust .38-.39

Unmodified Opinion—Form 11-K Filings with the SEC .40-.45

Full-Scope Audits—Unmodified Opinions on the Financial Statements with Modifications to the Report on Supplementary Information .46-.52

Prohibited Transactions .53-.56

Limited-Scope Audits Under DOL Regulations .57-.71

Change in Trustee .72

Reporting on Supplemental Schedules in a Limited-Scope Audit .73-.76

Standard Limited-Scope Audit Reports with Modifications to the Report on Supplemental Schedules .77-.79

Other Scope Limitations .80

Accumulated Plan Benefits—GAAP Departures and Changes in Accounting Estimates .81-.83

Terminating Plans .84-.85

Substantial Doubt With Respect to Going Concern .86-.87

Initial Audits of Plans .88

Prior Period Financial Statements Not Audited .89-.91

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

Index of Pronouncements and Other Technical Guidance

Subject Index