1 See Institute Memorandum to Pension Members No. 56-95, dated December 21, 1995.
July 10, 1996
VIA FAX
TO: PENSION COMMITTEE No. 33-96
RE: SENATE LABOR COMMITTEE TO CONSIDER REPEAL OF LIMITED SCOPE
AUDIT
______________________________________________________________________________
As explained further below, we are soliciting information regarding whether member
companies and their trust company affiliates currently obtain auditing reports pursuant to
Standard Auditing Standards No. 70 ("SAS 70"), which describes standards for reports issued
on the adequacy of processing and compliance procedures in service organizations.
On July 17, the Senate Committee on Labor and Human Resources is scheduled to
consider S. 1490, which, as previously reported1, proposes to repeal ERISA’s limited scope audit
provision. If repealed, plan auditors would need to review plan assets and records held by
banks, trust companies, and other financial institutions. Under current law, plan auditors rely
on certified statements from these institutions. The Institute has strongly opposed this bill. We
are concerned, however, that with some modification, the bill may be reported out of
Committee.
Specifically, one suggested modification would repeal the limited scope audit provision
but require the plan auditor to rely on an independent audit of the financial institution that
complies with SAS 70. Another suggested revision to the bill would require the plan auditor to
rely on the certified statements of the financial institutions which are used under current law
(see ERISA section 103(b)(3)(G)), but only to the extent that they are consistent with generally
accepted accounting principles.
It is our understanding that some, but not all, relevant member affiliates currently have
SAS 70 audits performed. We are soliciting information from you regarding whether or not
your organization obtains SAS 70 auditing reports, the estimated cost of such reports, and the
burden and time it would take to obtain such a report if required. More generally, would a SAS
70 requirement be an acceptable compromise?
If possible, please contact either me at (202) 326-5835, or Cathy Heron at (202) 326-5830
with comments by Thursday, July 11, as we will be meeting with relevant Labor Committee
staff late Thursday afternoon.
Russell G. Galer
Assistant Counsel - Pension