December 24, 1996
TO: BOARD OF GOVERNORS No. 65-96
ACCOUNTING/TREASURERS COMMITTEE No. 50-96
PENSION COMMITTEE No. 49-96
RE: PROPOSED REPEAL OF ERISA’S LIMITED SCOPE AUDIT PROVISION
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As you may know, the limited scope audit provision of ERISA permits an auditor
examining a pension plan’s financial statements to rely upon a certified statement of a financial
institution serving as plan trustee or custodian, in lieu of performing an audit of that financial
institution. Thus, a mutual fund affiliate providing trust or custodial services to pension plans
generally is not subject to audit by the auditors of those plans.
Legislation to repeal ERISA’s limited scope audit provision narrowly missed enactment
in the last Congress and is likely to be reintroduced in the next session of Congress. The
Institute has opposed this legislation because it would impose substantial additional costs and
burdens on both retirement plans and financial institutions serving as plan trustees and
custodians. The major auditing firms and the AICPA have actively supported the legislation,
however.
In the attached letter sent to each of the major mutual fund auditing firms, the Institute
urges these firms to reconsider their position and oppose the limited scope audit repeal
legislation.
We will keep you informed of developments on this legislative proposal.
Catherine L. Heron
Vice President and Senior Counsel
Attachment