Lack of Fidelity Bond Coverage

[Guest maddie]

Do you have an opinion on a financial statement auditor's responsiblity when it is discovered that an audit client does not maintain fidelity bond coverage on a pension plan? They are in the process of obtaining the coverage, but it will not be in place before the 10/15/02 filing deadline. Auditors are opining on the financial statements and not the operational compliance of the plan, so would it be necessary to disclose this finding in the notes to the financial statements?

[E as in ERISA]

The only thing that I've seen the auditors do is issue a management letter suggesting that they obtain the bond. But it generally doesn't have financial statement impact for the plan.

[Guest Keith N]

I had a similar situation. I checked the box "no" on the coverage question and wrote a letter to the client informing them that they were out of compliance with ERISA. It was a small plan and was not subject to the audit requirements, but the auditors did issue a management letter also informing them that they were out of compliance.

If it is a small plan and assuming all of the assets are "qualifying plan assets", I think they will still meet the requirements of 29 CFR 2520.103-1(B) (Question 4k of Schedule I). That is they still aren't required to have a full audit.