ERISA Section 103(a)(3)(C) audit (limited-scope audit)

Definition

ERISA Section 103(a)(3)(C) allows a plan administrator to instruct the auditor not to perform procedures on investment information prepared and certified by a qualified institution, such as a bank, trust company, or regulated insurance company. The certification must state that the information is complete and accurate. The older term for the engagement was a limited-scope audit. Under AU-C 703, the auditor's report still gives an opinion on the financial statements and describes the certified information that was not audited.

Why it matters in an audit or review

The auditor does not test the certified investments, but still reads the certification, evaluates whether the certifying institution qualifies, tests whether the certified information agrees with the statements and the reporting, and audits everything else, including contributions, benefit payments, and participant data. The report must explain the exclusion, and the plan financial statements still include the certified amounts.

Example

Illustrative: a plan holds all investments at a bank trustee that certifies the balance and activity. The administrator instructs the auditor to exclude those investments. The auditor tests contributions, distributions, and loans, and the report explains the exclusion.

Common mistakes

Treating the certified amounts as outside the audit entirely, without testing agreement with the financial statements.

FAQ

Is this a qualified opinion?

Under AU-C 703, not solely because of the instruction. The report explains the limitation without modifying the opinion for it.

Sources

• ERISA section 103(a)(3)(C), 29 U.S.C. 1023(a)(3)(C)
• 29 CFR 2520.103-8 and 2520.103-5, limited exemption for certain plan assets held by regulated institutions
• AICPA, AU-C Section 703, Performing and Reporting on an Audit of Employee Benefit Plans Subject to ERISA (SAS 136)