Facts About A Limited Scope Audit



The limited scope audit is properly described and clarified at the Employee Retirement Income Security Act (ERISA) section 103(a)(3)(c). ERISA permits plan sponsors to tell an auditor not to do any auditing work with regards to investment information prepared or certified by banks, any similar institution, or by insurance companies that are regulated or supervised, or subjected to periodic monitoring by a state or federal agency. This state or federal agency serves as the custodian or trustee of the said institution.



This action is allowed only if the completeness and accuracy of the information is certified by the custodian or trustee. ERISA is a federal law in the United States created to establish minimum standards for pension plans that exist in the private sector. The federal law provides rules on the effects on federal income tax of transactions relating to employee benefit plans. The law was passed and enacted to protect plan holders and their beneficiaries. It requires pension plans to disclose their financial and other important information. The Department of Labor, the Pension Benefit Guaranty Corporation, and the Department of the Treasury (in particular, the Internal Revenue Service) are the federal government agencies responsible for interpreting and enforcing ERISA. ERISA covers both pension plans and health benefit plans. Although ERISA does not mandate that companies establish pension plans, it regulates the operation of pension plans once they are already established.

It regulates how pension plans will pay plan holders. It will also require companies who sponsor plans to provide minimum funding requirements. Just like pension plans, ERISA will also not require companies to provide health insurance to their workers, but it will regulate the operation of the health benefit plan. The most important goal of ERISA is to protect the rights of employees to their benefits. Wikipedia defines auditing as the process of evaluating an organization, system, process or others. Audits are done to monitor the reliability and validity of information. In financial accounting, auditing is done to assess the fairness and equality by which the financial statements of a company are presented. An auditor performs the audit while an accountant issues the auditor's report.

An audit must adhere or be based on generally accepted standards created and set by organizations. Auditing and accounting standards are created to assure third parties that such statements are true, and are presented fairly and without bias. An advantage of the limited scope audit is that it results to reduced auditing procedures and less fees. However, it does not exempt a plan from being audited; rather it reduces the responsibilities of the auditor. Limited scope auditing will also be performed on plans that are funded under a master trust setup or other similar arrangement. Separate individual certification will be needed from the custodian or trustee for the allocation of assets and related income activities of the plan.

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