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Congress does not repeal limited-scope pension audits.

Congress dropped an amendment from the Federal Aviation Administration Reauthorization Act (HR 3539) that would have repealed limited-scope pension audits. Opponents of the limited-scope audits, including the American Institute of CPAs, argued that pension plan beneficiaries did not get full disclosure of the plan assets available to them at retirement when the independent accountant's audit was restricted. Efforts to repeal the limited-scope audit provision date back to 1990, when bills were introduced by Senator Robert Dole (RKan.) and House Minority Leader Robert H. Michel (R-Ill.).

Currently, the Employee Retirement Income Security Act of 1974 (ERISA) allows the pension plan administrator to elect to exclude from the audit the plan assets that are held in financial institutions. If the administrator chooses to have a limited-scope audit, the independent auditors cannot express an opinion on the plank financial statements. Plan administrators elect limited-scope audits for approximately half of all pension plan audits.

The American Institute of CPAs argued that restricted pension plan audits provided no assurance about the fair presentation of financial statements and their conformity with generally accepted accounting principles. In a letter to be sent to members of Congress, J. Thomas Higginbotham, AICPA vice-president-congressional and political affairs, said the amendmenr to repeal limited-scope audits would provide cost-effective assurance that pension plan participants knew their plans' financial positions.

The amendment to repeal the provision met with strong opposition by some business associations, such as the National Association of Manufacturers and the Investment Company Institute, which argued that the costs of full-scope pension audits would be extremely expensive and a burden on plan sponsors. Higgenbotham, disagreeing about the costs, said the benefits of the assurances outweighed the incremental cost involved. The AICPA said it would continue to pursue a repeal of the limited-scope audit provision next congressional session.
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Publication:Journal of Accountancy
Article Type:Brief Article
Date:Dec 1, 1996
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