Audit guidance on pensions issued
The Auditing Practices Board today issued long-awaited guidance for auditors following new accounting rules on pensions disclosures.
Auditors voiced concerns earlier this year over their role in auditing retirement benefits, given the dependence on other professionals, such as actuaries and fund managers, to provide the necessary information.
The APB practice note emphasises that it is directors’ and not auditors’ responsibility to prepare financial statements in accordance with FRS 17, Retirement Benefits. Directors must identify their obligations, whether documented or not, to pay retirement benefits, the APB said.
FRS 17 does not take full effect until 2003, but from this December, disclosures must be made in the notes accompanying accounts.
Ian Plaistowe, APB chairman said: ‘Auditors will need to be satisfied with the quality of these disclosures and already ought to be considering whether their clients have secured the actuarial resources and established the processes they need in order to be able to meet the new requirements.’
Effective communications with all parties involved in the calculation and financial reporting of pensions is a key aspect for auditors, the practice note emphasised.
Other crucial areas for auditors include verifying the objectivity of the actuary, as well as the scope of the work and assessing the actuary’s work as audit evidence.
Links