Statements of Position



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The proposed guide provides guidance to the independent auditor in examining and reporting on the financial statements of employee benefit plans, including defined benefit pension plans, defined contribution plans, and health and welfare benefit plans. In March 1980 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 35, Accounting and Reporting by Defined Benefit Pension Plans, which established generally accepted accounting principles for defined benefit pension plans and prescribed the general form and content of financial statements of those plans. Chapter 2 of this guide describes the principal provisions of FASB Statement No. 35; however, it should be noted that we are not requesting comments on the requirements established by the FASB. Guidance on accounting for defined contribution plans and health and welfare benefit plans is not included in this exposure draft. The Employee Benefit Plans and ERISA Committee is developing papers discussing the accounting issues related to those types of plans and including advisory conclusions for consideration by the FASB. The ultimate form of any accounting guidance will be determined by the FASB. In any event, the AICPA and the FASB will follow appropriate due process, including exposure for comments, before publishing guidance with respect to those accounting issues. The exposure draft contains guidance on auditing procedures with respect to defined contribution plans and health and welfare benefit plans, but, depending on the resolution of the accounting issues, additional guidance on auditing procedures for those types of plans may be needed. Chapter 7 provides guidance on the auditor's procedures with respect to a plan's investments, including investments held in discretionary trusts, common or commingled trust funds, master trusts, and insurance company individual and pooled separate accounts. Based on responses to an issues paper by the AICPA Auditing Standards Division, "Employee Benefit Plans: Auditing Procedures for Bank Trusteed Assets and Related Transactions and Supplemental Issue" (April 30, 1977), the guide includes, as an alternative procedure, the obtaining of another independent accountant's report on the trust or insurance company's internal accounting controls relating to investments held on behalf of, or for the benefit of, the plan. Such reports are commonly referred to as "single-auditor reports." A task force of the AICPA Auditing Standards Board is developing guidance on the preparation of a single-auditor report. Chapter 10 discusses the auditor's responsibility and procedures to be applied to actuarial determinations affecting such matters as plan contributions and accumulated plan benefits. The guidance was derived from Statement on Auditing Standards No. 11 (AU section 336), Using the Work of a Specialist. SAS No. 11 requires the auditor to test census data provided by the plan and used by the actuary, to obtain satisfaction regarding the professional qualifications and reputation of the actuary, to obtain an understanding of the actuary's methods and assumptions, and to consider whether the actuary's findings support the related representations in the financial statements. The appropriateness of the methods and assumptions used and their application are within the expertise of the actuary, and the auditor is not required to perform additional auditing procedures with respect to the actuary's determinations. Furthermore, SAS No. 11 prohibits the auditor from making reference in his report to his use of the actuary's work. Some accountants believe that the auditor should either (a) be required to extend his procedures beyond those required by SAS No. 11 to test the application and to satisfy himself about the appropriateness of the actuarial methods and assumptions or (b) be permitted to rely on the report of the actuary and to refer to the actuary in the auditor's report. (Such a reference is not currently permitted by SAS No. 11.) They believe that the auditor's lack of expertise in actuarial concepts and practices and the cost of applying extended procedures to actuarial determinations make reliance on, and reference to, the actuary the preferable alternative.

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Pension trusts -- United States; Employee fringe benefits -- United States -- Accounting; Employee fringe benefits -- United States -- Auditing


Accounting | Taxation


Originally published by: American Institute of Certified Public Accountants; Copyright and permission to reprint held by: American Institute of Certified Public Accountants.

Proposed audit guide : audits of employee benefit plans ;Audits of employee benefit plans; Exposure draft (American Institute of Certified Public Accountants), 1980, June 30



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