ERISA Section 103(a)(3)(C) Audit

Erisa Section 103(a)(3)(c)

Written by Erica Knerzer

October 12, 2022

The new audit standard, Statement on Auditing Standards No. 136, is now effective for calendar year-end employee benefit plans subject to ERISA (Employee Retirement Security Act of 1974). If you previously had a DOL limited scope audit, you will now see a new report name and a brand new audit report. The limited scope audit will now be called an ERISA Section 103(a)(3)(C) Audit. The name does not quite roll off the tongue that easily but the standard was designed to permit more transparency in the overall audit report.

Previously with a limited scope audit, auditors would disclaim an opinion but now they will be able to give an opinion on the information that is not covered by the asset certification that you receive from a qualified institution.

What Does an ERISA Section 103(a)(3)(C) Audit Mean to Plan Management?

  • There will be more items for you to acknowledge upfront in the engagement letter such as:
    • Ensuring that you are maintaining a current plan document and properly administering the plan (making sure there are adequate records to support both the plan document and the overall financial statements)
    • Asserting that you will provide the auditors with a substantially complete Form 5500 prior to dating the audit report
    • Making the determination that an ERISA Section 103(a)(3)(C) audit is indeed permissible–there are certain criteria that asset certifications have to meet and it has to be completed by an institution that is qualified to do so
  • You may see more audit findings in writing than you previously have. Auditors are required to have an open dialogue with plan management with any noncompliance items they run across and the standards require these findings to be documented in writing versus just verbally. There will be additional wording added to the Communication With Those Charged with Governance letter this year.
  • As mentioned above, the audit report will look different but should provide more transparency as to what the auditor has been able to give their opinion on with respect to the audit procedures that were performed. The report will now state that it was management’s election to have an ERISA Section 103(a)(3)(C) Audit and that it was management’s determination that the certification was adequate for performing that type of audit. Management’s responsibilities with respect to the financial statements will now also be defined in the report.
  • There will also be changes to the representation letter that you sign at the end of the audit process and will be more reflective of the items that are inquired about upfront in the engagement letter and planning process of the audit.

Please do not hesitate to reach out to us with any questions you have on the new standard or if you have any other benefit plan needs.

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Erica Knerzer
I joined Hawkins Ash CPAs 20 years ago. As a senior manager in the firm’s La Crosse, WI, office, I focus on audit. I am a member of the firm’s Audit and Accounting Committee. I also co-chair the firm's Employee Benefit Plan Services group.

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