Effect of Internal of Safeguarding Assets
PLAN ADVISORY
The Importance of Internal Controls in Financial Reporting and Safeguarding Plan Assets
PLAN ADVISORY
Table of Contents
I Introduction I Why Internal Control Is Important to Your Plan I What Is Internal Control? I How to Establish Cost-Effective Controls I Monitoring Your Controls is Critical I Auditor Communications of Internal Control Deficiencies 10 8 6 5 4 3
I How Your Auditor can Help You Improve the Effectiveness of Your Plan’s Internal Control I Examples of Selected Controls for Employee Benefit Plans 14 11
Introduction
The AICPA Employee Benefit Plan Audit Quality Center has prepared this advisory to assist you as a plan sponsor, administrator, or trustee in understanding how internal control over financial reporting is critical to your plan. This advisory discusses:
I I I I I I I
Why internal control is important to your plan The basics of internal control How to establish cost-effective controls Monitoring your controls Auditor communications of internal control deficiencies How your auditor can help you improve the effectiveness of your plan’s internal control Where to obtain additional information about internal controls
In addition, this advisory contains helpful examples of controls for you to consider establishing at your plan. This advisory should be used for reference purposes only.
3
Why Internal Control Is Important to Your Plan
AS A PLAN SPONSOR, ADMINISTRATOR, OR TRUSTEE, YOU ARE CONSIDERED A FIDUCIARY UNDER ERISA — As such, you are subject to certain responsibilities, and with these fiduciary responsibilities come potential liability: Fiduciaries that do not follow the basic standards of conduct may be personally liable to restore any losses to the plan, or to restore any profits made as a result of their improper use of the plan's assets. Under ERISA, your responsibilities include plan administration functions such as maintaining the financial books and records of the plan, and filing a
The Importance of Internal Controls in Financial Reporting and Safeguarding Plan Assets
PLAN ADVISORY
Table of Contents
I Introduction I Why Internal Control Is Important to Your Plan I What Is Internal Control? I How to Establish Cost-Effective Controls I Monitoring Your Controls is Critical I Auditor Communications of Internal Control Deficiencies 10 8 6 5 4 3
I How Your Auditor can Help You Improve the Effectiveness of Your Plan’s Internal Control I Examples of Selected Controls for Employee Benefit Plans 14 11
Introduction
The AICPA Employee Benefit Plan Audit Quality Center has prepared this advisory to assist you as a plan sponsor, administrator, or trustee in understanding how internal control over financial reporting is critical to your plan. This advisory discusses:
I I I I I I I
Why internal control is important to your plan The basics of internal control How to establish cost-effective controls Monitoring your controls Auditor communications of internal control deficiencies How your auditor can help you improve the effectiveness of your plan’s internal control Where to obtain additional information about internal controls
In addition, this advisory contains helpful examples of controls for you to consider establishing at your plan. This advisory should be used for reference purposes only.
3
Why Internal Control Is Important to Your Plan
AS A PLAN SPONSOR, ADMINISTRATOR, OR TRUSTEE, YOU ARE CONSIDERED A FIDUCIARY UNDER ERISA — As such, you are subject to certain responsibilities, and with these fiduciary responsibilities come potential liability: Fiduciaries that do not follow the basic standards of conduct may be personally liable to restore any losses to the plan, or to restore any profits made as a result of their improper use of the plan's assets. Under ERISA, your responsibilities include plan administration functions such as maintaining the financial books and records of the plan, and filing a