Читать книгу Auditing Employee Benefit Plans - Josie Hammond - Страница 29

As noted earlier, the operation of a benefit plan is substantially controlled by the tax code. Thus, the auditor is advised to have a working understanding of these elements. Most of the rules for pension plans are found in Sections 401 through 416 of the IRC. Welfare benefit plans have fewer code rules, and those rules are scattered throughout the IRC.

GAAS does not require that the auditor have a thorough understanding of the intricacies of these tax rules. GAAS limits the auditor’s duty for compliance matters to those that could affect a significant financial statement account. It is important for the auditor to be able to identify the type of elements involved in the operation of the plan and where they might have financial statement effect. It is important for inquiries to be made as to whether the appropriate tests have been conducted and whether the tests have been passed or failed. Where such tests have been failed, the auditor needs to understand the effect on the plan’s financial statement. This may involve a contribution receivable or a payable to refund impermissible amounts. In addition, the auditor needs to be able to recognize that other items uncovered during the audit may have an effect on the tax status of the plan. Where such events are discovered, the auditor needs to assess the effect on the financial statements and obtain appropriate representations that any actions required to retain the plan’s exempt status will be taken.

The easiest way to understand these tax rules is to approach them from the formation through annual operations to termination of a plan.

Even though benefit plans are typically exempt from income taxes, it is important for the auditor to assess whether or not there are any uncertain tax positions. This is because the plan can face uncertainty with respect to retaining its tax-exempt status, or where the plan’s investment activity generates unrelated business income tax. This will be addressed in more detail in the discussion of unrelated business income tax in the following sections.