Accountancy institute publishes DB guidance for auditors

The guidance notes that DB deficits and surpluses, as well as valuations of underlying assets and liabilities, are often “significant” figures on employers’ financial statements, but that schemes themselves are independent of employers and must be treated accordingly.

Understanding the various parties involved in DB schemes requires that auditors interact with a variety of stakeholders besides the employer’s management team, such as scheme trustees and third-parties involved in the scheme at the request of those trustees.

The ICAEW has thus published guidance setting out the roles held by these various parties and the relationships between them, with a view to establishing best practice in managing auditor requests.

In particular, the guidance explains that it is important for auditors to obtain “robust audit evidence” without filing duplicate requests, and where such requests are made it encourages the sponsor entity, management’s actuary, and the sponsor auditor to “work together to identify the information that has already been provided and what remains outstanding”.

Part of this will involve the auditor assessing the competence of the other parties, such as the management’s actuary, as well as the actuarial assumptions used to determine liabilities. Likewise, assessing the accuracy and completeness of source data is listed as a key duty.

“Sponsor entity management is central to the communication process — both as the primary source of information, and as the authority for direct communication between management’s actuary and the sponsor auditor when this is considered necessary,” the guidance explains.

“Good communication is vital to avoid superfluous or irrelevant information requests that could lead to inefficiency and unnecessary costs for any of the parties involved.”