Limited Scope audit or Full scope audit

[Guest RyanA]

I'm currently doing a research project for my firm, and I have not been able to come up with any answers for this situation.

We have a client who last year we performed a full scope benefit plan audit. During the current year, their custodian from January 1 to July 31 was the same as last year, an unqualified custodian, therefore we performed full-scope procedures on the net assets. But, on July 31, the plan switched to a qualified custodian who then issued us certified statements, and therefore we performed limited-scope procedures for the plan for the last 5 months of the year.

What I cannot find the answer to is, what type of opinion do we issue? I did find a past client who was a reverse situation, where they were with a qualified custodian for the first 4 months of the year, and we obtained certified statements, but then for the last 8 months of the year they switched to a non-qualified custodian, and because of this we issued a full-scope opinion.

But in my current situation, the majority of the year is a full-scope situation, but the final months of the year are a limited-scope situation.

I have researched the AICPA Benefit Plan audit guide with no luck, and also the PPC Audits of Employee Benefit Plans without finding a good example/description of this situation.

If anyone has any ideas, input would be helpful.

-Ryan

[JohnCheek]

The DOL limited scope exception ALLOWS you to skip testing the investment data certified by the custodian, but you still have to test everything else. If there is a second custodian who does not ( or can not) give you a certification that DOL accepts, you obviously have to test the investment data for activity and balances at the second custodian. So, you do a full scope audit on the second custodian, and a limited scope audit on the first custodian.

Now, since you have to give one opinion on the whole year, it has to be a limited scope opinion, which says , basically, that the scope of your audit was limited, so you can not express an opinion.

The normal limited scope opinion refers to a footnote that summarizes the data certified by the custodian. You might expand that footnote to explain that such data represents only half the year.

[jaemmons]

I was reading a letter from John Canary to Richard Steinberg of the AICPA, dated May 17, 2002 (the address is http://www.aicpa.org/belt/ltdscope1_dol.htm) Although the gist of the letter deals with limited scope audit, there is mention that if there is any question as to the validity of fair market value of the assets at any point during the plan year, it may be imprudent for the accountant to not perform a full scope audit and issue and opinion thereon.

Given the fact the plan's assets were at one point during the plan year, held by an institution which did not meet the requirements of 29 CFR 2520.103-8(B), you cannot perform a limited scope audit. I err on the conservative side, which may be prudent given the current standing of the auditing profession.

[JohnCheek]

jaemmons said:

"Given the fact the plan's assets were at one point during the plan year, held by an institution which did not meet the requirements of 29 CFR 2520.103-8(B), you cannot perform a limited scope audit."

I agree that you can not limit the audit with respect to THOSE assets; you must test the balances and transactions just as you would in a full scope audit.

However, you can limit your procedures with respect to the assets held by the qualified custodian.

Nothing in the DOL regs suggest that 100% of the assets have to be covered by the certification.