Auditor's Inquiry

[Carol V. Calhoun]

We have been asked to respond to an auditor's inquiry.  We are not aware of any litigation regarding this company.  However, there is a union grievance related to changes they made to the retirement plan.  Has anyone considered the issue of whether a union grievance constitutes a "claim"?

[Larry Starr]

Just considered it; no, it does not constitute a claim.

[Carol V. Calhoun]

On what basis did you decide it was not?  I haven't been able to locate any direct authority, one way or the other.

[david rigby]

Carol, does this depend on the context?  That is, if you are deciding whether to do some type of "disclosure", is it appropriate to err on the side of caution?

[Carol V. Calhoun]

1 minute ago, david rigby said:

Carol, does this depend on the context?  That is, if you are deciding whether to do some type of "disclosure", is it appropriate to err on the side of caution?

Yeah, I'm thinking that our most conservative option is to talk to the client about disclosing, and/or to see whether we can limit our letter to "material" items and exclude it that way.  But I was hoping someone had more definitive guidance.

[jpod]

Is this an audit of the plan sponsor/employer, or of the plan?  If it is the plan sponsor, I don't understand how it would not be an asserted claim as described in the Treaty.   If it is an audit of the plan, I don't see how this matter is pertinent to the financial statements of the plan.

[Larry Starr]

On 7/3/2017 at 1:41 PM, Carol V. Calhoun said:

On what basis did you decide it was not?  I haven't been able to locate any direct authority, one way or the other.

YOU asked if "anyone has considered it".  So, I considered it.   Any considered opinion is that it is NOT a claim. While I am not a CPA and can't do audits, I am theoretically an accountant (I'm an "enrolled agent") and I simply would not treat this as a "claim" until such time as a court (or agency) of competent jurisdiction made a decision that impacted the plan in some specific way.

[jpod]

I simply would not treat this as a "claim" until such time as a court (or agency) of competent jurisdiction made a decision that impacted the plan in some specific way.

Well, that's clearly wrong.  There only needs to be an asserted or overtly threatened "claim."  Carol's Q goes to the definition of "claim." 

 

[MoJo]

I think the decision rests on materiality - and that is a judgment on the part of management.  Does the grievance have "merit?"  Is there a likelihood that the union will prevail?  What are the costs shold the union prevail?

I agree with David Rigby - that erring on the side of caution is appropriate - but that doesn't always mean it needs to be disclosed.