The AU-C 703 auditor’s report, reportable findings and the draft Form 5500

In this lesson you will

Identify the engagement acceptance conditions AU-C 703 adds
Describe the two-part opinion in a 103(a)(3)(C) audit report
Report on ERISA-required supplemental schedules, including form and content
Communicate reportable findings in writing as AU-C 703 requires

Scope and effective date

AU-C 703 (SAS 136, as amended) applies to audits of financial statements of employee benefit plans subject to ERISA, for periods ending on or after December 15, 2021. It covers single employer, multiple employer and multiemployer plans, and it adds requirements at acceptance, during the audit and at reporting. It takes the place of AU-C 700 and paragraph .09 of AU-C 725 for these audits; every other AU-C section still applies.

Acceptance conditions

Before accepting, the auditor obtains management's agreement that it acknowledges responsibility for:

maintaining a current plan instrument, including all amendments;
administering the plan and determining that transactions presented in the financial statements conform to the plan's provisions, including maintaining sufficient records of each participant to determine the benefits due or which may become due; and
providing a draft Form 5500 that is substantially complete before the report date.

The draft must be in hand before the report date so the auditor can read it against the audited statements and the supplemental schedules. For a 103(a)(3)(C) audit, management also acknowledges the four determinations covered in the prior lesson. The EBP representation letter template carries these into the written representations.

The report

The report identifies the plan as subject to ERISA. The management responsibilities section includes the plan-specific responsibilities above. The auditor reads the draft Form 5500 to identify material inconsistencies with the audited financial statements, and if one is found, determines whether the statements or the Form 5500 need revision.

Full-scope audit. A standard AU-C 700 style opinion on the financial statements.

103(a)(3)(C) audit. The report opens with a section describing the scope and nature of the ERISA section 103(a)(3)(C) audit and then gives a two-part opinion:

whether the amounts and disclosures not covered by the certification are presented fairly, in all material respects, under the applicable framework; and
whether the certified investment information in the financial statements agrees to, or is derived from, in all material respects, the information certified by the institution.

There is no disclaimer.

Supplemental schedules

The ERISA-required supplemental schedules, such as Schedule H line 4i (assets held for investment), line 4j (reportable transactions) and line 4a (delinquent participant contributions), are supplementary information required by the DOL. The auditor reports on them in an other-matter section: the information is fairly stated in all material respects in relation to the financial statements as a whole, and the form and content are presented in conformity with the DOL's Rules and Regulations for Reporting and Disclosure under ERISA. That form-and-content conclusion is unique to ERISA plans. A schedule missing a required column or a party-in-interest notation fails it.

Reportable findings

AU-C 703 requires the auditor to evaluate whether matters identified are reportable findings, meaning one or more of:

an identified instance of noncompliance or suspected noncompliance with laws or regulations;
a finding that is significant and relevant to those charged with governance in overseeing the financial reporting process; or
an indication of deficiencies in internal control, not already communicated to management by other parties, of sufficient importance to merit management's attention.

Reportable findings are communicated in writing to those charged with governance on a timely basis, with a description, context and the potential effects. The auditor may not issue a written communication saying no reportable findings were identified. Typical examples are late deferral deposits, operational failures to follow the plan document and missing fidelity bond coverage. See the AU-C 260 communication guide.

Common file mistakes

Report dated before a substantially complete draft Form 5500 was received.
103(a)(3)(C) report with the old disclaimer language.
No form-and-content evaluation of the supplemental schedules.
A governance letter stating "no reportable findings."

Worked example

Lakeside Credit Union Retirement Plan: reportable findings letter

During the 2025 audit of Lakeside Credit Union Retirement Plan (a 103(a)(3)(C) audit), the team identifies:

Deferrals from 3 of 26 payrolls were deposited 12 to 19 business days after the pay date. Total late deferrals $46,300; lost earnings computed at $410.
The plan document defines compensation to include bonuses, but bonuses paid in December were excluded from deferral elections. Missed deferrals on $88,000 of bonuses.
The draft Form 5500 Schedule H line 4i omits the party-in-interest notation for the trustee's proprietary money market fund.

Evaluation: item 1 is noncompliance with 29 CFR 2510.3-102 and must be reported on Schedule H line 4a; it is a reportable finding. Item 2 is an operational failure under the Internal Revenue Code and the plan document; it is a reportable finding. Item 3 is a form-and-content issue; management corrects the schedule before the report date, so the supplemental schedule opinion can be unmodified.

The written communication to the plan's administrative committee describes items 1 and 2, gives the dollar amounts and periods, explains the potential effects (excise tax and correction under the DOL and IRS programs) and is issued with the AU-C 260 communications. The auditor's report contains the two-part 103(a)(3)(C) opinion and an unmodified opinion on the supplemental schedules, including form and content.

Self-check

Answer each question before you open the answer.

Can the auditor date the report before receiving a draft Form 5500?
Show answer
No. AU-C 703 requires management to agree at acceptance to provide a substantially complete draft Form 5500 before the report date, and the auditor reads it for material inconsistencies.
What are the two parts of the opinion in a 103(a)(3)(C) audit report?
Show answer
An opinion on whether amounts and disclosures not covered by the certification are presented fairly, and an opinion on whether the certified investment information agrees to, or is derived from, the certification in all material respects.
The audit found nothing reportable. May the auditor send a letter saying so?
Show answer
No. AU-C 703 prohibits a written communication stating that no reportable findings were identified.

Sources

Back to the syllabus

Standards are paraphrased from the primary sources listed above; read the source before relying on a requirement. This lesson is training material, not professional advice. Report an error