Audit Communications a nd DOL Update

Audit Communications and DOL Update

Limited Scope vs. Full Scope Audit Disclaimer of Opinion &Audit Communications Dawn Doucette, Audit Senior Manager David Murray, Audit Senior Manager

Limited Scope vs Full Scope Audit • ERISA section 103(a)(3) allows the plan administrator to instruct the auditor not to perform any auditing procedures with respect to investment information prepared and certified by a bank or similar institution or by an insurance carrier that is regulated, supervised, and subject to periodic examination by state or federal agency who acts as trustee or custodian. • This election is available, however, only if the trustee or custodian certifies both the accuracy and completeness of the information submitted. • The limited-scope audit exemption is implemented by 29 CFR 2520.103-8 of the DOL’s Rules and Regulations for Reporting and Disclosure under ERISA. • The limited-scope exemption does not exempt the plan from the requirement to have an audit.

Limited Scope vs Full Scope Audit (continued) • The exemption only applies to the investment information certified by the qualified trustee or custodian, and does not extend to participant data, contributions, benefit payments or other information whether or not it is certified by the trustee or custodian.

IRS Approved List SUB HEADING ONE Here is where you will type your slide. Continue until you fill up this square area. http://www.irs.gov/Retirement-Plans/Approved-Nonbank-Trustees-and-Custodians

Limited Scope vs. Full Scope Audit SUB HEADING ONE Here is where you will type your slide. Continue until you fill up this square area.

Disclaimer of Opinion Disclaimers of opinion are sometimes issued by an auditor. This type of auditor’s statement essentially makes it clear that the auditor is not in a position to express a specific opinion on the overall status of the financial records of the Plan. This letter may be issued when there is any type of situation (i.e. investments certified by custodian/trustee) where the auditor is not able to complete procedures to his or her satisfaction.

Disclaimer of Opinion (continued) • The actual structure of a disclaimer of opinion may vary slightly from one instance to another. However, the letter will contain three specific pieces of information in all cases: • First, the auditor will formally state that he or she is unable to express an opinion as permitted by the Department of Labor. • The next section will identify the specific reasons why the auditor is unable to provide an unqualified opinion (because the Plan investments were certified by an authorized third party). • As a third element, the auditor will provide any reservations present in regard to the financial records that were provided.

Disclaimer of Opinion (continued) • Essentially, the opinion is a letter from the accountant stating that the financial statements are in accordance with generally accepted accounting standards. The disclaimer of opinion issued during a DOL limited scope audit is due to the lack of procedures performed on investments, and make it impossible for the auditor to affirm the completeness of the information provided.

DOL Limited-scope Audit Engagement Letter • Required by the Department of Labor’s (DOL) Rules and Regulations for Reporting and Disclosure under ERISA to be filed with Form 5500 • Comprise the statements of net assets available for benefits • Related statement(s) of changes in net assets available for benefits • Notes to the financial statements • Supplementary information accompanying the financial statements • Assets (Held at End of Year) • Delinquent Participant Contributions

DOL Limited-scope Audit Engagement Letter (continued) Audit Objective • We will not perform any auditing procedures with respect to information prepared and certified to by, the trustee, in accordance with DOL Regulation 2520.103-5, other than comparing the information with the related information included in the financial statements and supplemental schedules. Because of the significance of the information that we will not audit, we will not express an opinion on the financial statements and supplemental schedules taken as a whole. • We cannot provide assurance that a limited-scope disclaimer of opinion as permitted by Regulation 2520.103-8 of the DOL’s Rules and Regulations for Reporting and Disclosure under ERISA will be expressed.

DOL Limited-scope Audit Engagement Letter (continued) Audit Procedures • At the conclusion of our audit, we will require certain written representations from you about the financial statements and related matters.

DOL Limited-scope Audit Engagement Letter (continued) Management Responsibilities • Oversee the services by designating an individual, preferably from senior management, with suitable skill, knowledge, and/or experience; evaluate the adequacy and results of the services; and accept responsibility for them. • You are responsible for establishing and maintaining internal controls, including monitoring ongoing activities; for the selection and application of accounting principles; • For the preparation and fair presentation of the financial statements in conformity with U.S. generally accepted accounting principles. • Responsible for making all financial records and related information available to us and for the accuracy and completeness of that information, including the completeness and accuracy of the certification by the trustee.

Communication with Those Charged with Governance during Planning • Main Items Discussed: • Our Responsibility under U.S. Generally Accepted Auditing Standards • Planned Scope and Timing of the Audit • When we expect to begin our audit and the issuance date (extended filing deadline of October 15).

Standard Plan Inquiries Commitments & Contingencies • Any consultations with legal counsel • Any IRS examinations in progress • Are you in compliance with the fidelity bonding requirements

Standard Plan Inquiries (continued) Subsequent Events • Amendments to the Plan or trust instruments since year end • Decisions after plan year end to terminate the plan

Standard Plan Inquiries (continued) Fraud or Illegal Acts • Errors, irregularities, or illegal acts concerning the Plan • Instance of actual or suspected fraud affecting the Plan • Areas(s) that would be susceptible to fraud relating to the Plan for which we would need to focus our attention

Standard Plan Inquiries (continued) Board Meeting Minutes • Any board or governing body meeting minutes during the Plan year which specifically address any matters related to the Plan.

Management Representation Letter Financial Statements • We confirm, to the best of our knowledge and belief, as of, the following representations made to you during your audit: • We have fulfilled our responsibilities, as set out in the terms of the audit engagement letter • The financial statements are fairly presented in conformity with U.S. GAAP, the notes include all disclosures required by laws and regulations to which the plan is subject, including the DOL Rules and Regulations for Reporting and Disclosure under ERISA, and the supplemental schedules referred to above are fairly presented in conformity with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. • All events subsequent to the date of the financial statements and for which U.S. GAAP requires adjustment or disclosure have been adjusted or disclosed.

Management Representation Letter (continued) Information Provided • Access to all information • We have no knowledge of any fraud or suspected fraud that affects the plan • Intentions to terminate the plan • Amendments to the plan instrument, if any, have been properly recorded or disclosed in the financial statements

Management Representation Letter (continued) Information Provided (continued) • The plan (and the trust established under the plan) is qualified under the appropriate section of the Internal Revenue Code and we intend to continue them as a qualified plan (and trust). • The plan has complied with the Department of Labor’s regulations concerning the timely remittance of participant contributions to trusts containing assets for the plan. • The plan has complied with the fidelity bonding requirements of ERISA.

Communication with Those Charged with Governance at Audit Conclusion Significant Audit Findings • Qualitative Aspects of Accounting Practices • You are responsible for the selection and use of appropriate accounting policies. • Difficulties Encountered in Performing the Audit • We encountered no significant difficulties in performing and completing our audit.

Communication with Those Charged with Governance at Audit Conclusion (continued) Significant Audit Findings (continued) • Disagreements with Management • For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor’s report. We are pleased to report that no such disagreements arose during the course of our audit.

Communication of Significant Deficiencies • Most common findings we see relate to: • Waiver forms • Incorrect employer matching • Incorrect vesting • Inability to verify deferral percentages • Delinquent contributions

Audit Communications a nd DOL Update