Guest LisaPA Posted October 3, 2001 Posted October 3, 2001 A defined contribution plan in existence since 1993 now needs an audit. We have performed a limited scope audit according to DOL regs so we will be disclaiming an opinion on that basis, but now I am trying to get happy with beginning participant account balances. It seems nearly impossible to recreate participant account balances from inception as PPC suggests. What have others done? The assets have been with the same insurance company since inception, and I was considering requesting SAS 70 reports for as far back as they can provide, hoping that controls over investments, earnings, contributions and distributions were addressed. Any help is appreciated.
Guest galdridge Posted October 5, 2001 Posted October 5, 2001 One way to look at beginning balances is to view participant account balances the same way you would unobserved inventory at the beginning of the year. Accordingly, when auditing a plan for the first time, you do have an obligation to determine that the accumulated participant account balances are reasonably stated. Our approach is as follows: First, we obtain an employee census and assess how many participants have been in the plan since inception or for a long period of time. If the plan has had high turnover, you might not have that big of a problem. Second, if a significant portion of the participants have been in the plan for a number of years, we obtain a participant account rollforward (prepared by the client) for a sample of participants that have been in the plan since inception or for a number of years and test the rollford to ensure that the accumulated account balances appear correct. Third, based on the results (or lack of results) of our test, we determine whether a scope limitation would be necessary. In the event that we are not able to perform auditing procedures with respect to individual participant account balances accumulated from inception of the Plan we would add a scope-limitation to our report. PPC has an example report for this situation. This subject was discussed at length by practitioners and by the DOL at the 2001 AICPA EBP conference. Ian Dingwall of the DOL stated that the DOL is accustom to seeing scope limitations related to beginning balances. However, Ian said that at some point, once the CPA becomes comfortable with how the plan is operating or as participants that have been in the plan a long time leave the plan, the CPA should be able to lift the scope limitation. The fact that your plan has used the same custodian (and I assume the same prototype agreement) since inception helps make the work easier because the testing becomes somewhat more difficult when you have to obtain, read and understand several different plan documents and track participant funds through several different custodians. Hope this helps. Glenn Aldridge, CPA Audit Manager Bennett Thrasher PC Atlanta, GA
Guest LisaPA Posted October 5, 2001 Posted October 5, 2001 Glenn, Thanks for your thoughtful reply. It will definitely help me with my audit approach. I remember speaking to Ian Dingwall (and then Bing Lam) on the phone 7 or 8 years ago when I started auditing these plans. Perhaps I will attend one of the conferences in the future. Lisa Flagg, CPA West Chester, PA
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