A plan administrator may engage an auditor to perform a full-scope audit of the financial statements of an employee benefit plan in accordance with Generally Accepted Auditing Standards (GAAS). Alternatively, the Employee Retirement Income Security Act of 1974 (ERISA) allows the plan administrator to engage a Certified Public Accountant to perform a limited scope audit.
When an auditor is engaged to perform a full-scope audit, everything in the plan is subject to audit testing. However, when performing a limited scope audit of the financial statements, the auditor need not perform any auditing procedures with respect to investment information prepared and certified by a qualified bank or similar institution, or by an insurance carrier. To be qualified, a bank or insurance carrier must act as a trustee or custodian for the plan, be state or federally chartered and be regulated, supervised and subject to periodic examination by a state or federal agency. Additionally, the trustee or custodian must certify as to the accuracy and completeness of the investment information.
A plan administrator may not engage an auditor to perform a limited scope audit if either of the conditions below apply to the employee benefit plan:
The trustee or custodian provides a certification that addresses only accuracy or completeness, but not both.
The assets are held by a broker/dealer or an investment company.
The CPA who is hired to perform a limited scope audit cannot give an unqualified opinion on the plan’s financial statements. The CPA’s opinion is called a Disclaimer of Opinion because the CPA has not been able to do sufficient work to form an overall opinion on the financial statements. The Department of Labor will accept a Disclaimer of Opinion for a limited scope audit.
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