What Employee Benefit Plan Administrators Should Consider for Their Next Audit

Increased oversight by the United States Department of Labor (“DOL”) and the Internal Revenue Service presents incredible challenges for benefit plan administrators. In recent years the DOL has stepped up its efforts to improve the quality of employee benefit plan audits.

A recent letter from the DOL Office of the Chief Accountant emphasized that selecting a qualified CPA who has the expertise to perform an audit in accordance with professional auditing standards is a critical responsibility in safeguarding your plan’s assets and ensuring your compliance with ERISA’s reporting and fiduciary requirements.

The DOL recommends considering the following factors when selecting your plan auditor:

The number of employee benefit plans the CPA firm audits each year, including the types of plans.

As they say, with experience knowledge is gained. It is important to hire an accounting firm that has the proper experience and reputation in the field of auditing employee benefit plans. When selecting an accounting firm, the employee benefit plan administrator should inquire as to: (1) how many similar size funds the CPA firm audits and request at least 5 references, and (2) how many employee benefit plan audits the firm conducts.

The extent of specific annual training the CPA received in auditing plans.

It is important to have partners and staff attend specific training on employee benefit plans, such as conferences and seminars sponsored by the International Foundation of Employee Benefit Plans and AICPA.  If the firm is a member of the AICPA Employee Benefit Plan Quality Center, it is mandatory to take a minimum of 8 hours of continuing professional education (“CPE”) every 3 years in the area of employee benefits.

The status of the CPA’s license with the applicable state board of accountancy.

Prospective clients should have the CPA firm provide proof that they are in good standing with the applicable state boards. An employee benefit plan administrator can go to www.op.nysed.gov/opsearches.htm, select “Accountant, Certified Public”, and then input the name of the accountant to verify if the N.Y.S. license is in good standing. Most other state education departments will provide this information.

Whether the CPA has been the subject of any prior DOL findings or referrals, or has been referred to a state board of accountancy, or the American Institute of Certified Public Accountants for investigation.

Prospective clients can search the AICPA website to determine what, if any, disciplinary actions have been brought against CPAs. This section of the AICPA website is updated quarterly.

Whether or not your CPA’s employee benefit plan audit work has recently been reviewed by another CPA (a “Peer Review”), and if so, whether such review resulted in negative findings.

All requests for proposals should ask the CPA firm to provide their Peer Review letter.  To be a member in good standing with the AICPA Employee Benefit Plan Audit Quality Center it is required that your latest Peer Review letter be posted on the AICPA website.  Peer reviews are required by the N.Y.S. Department of Education Division of Professional Licensing; however, it exempts sole proprietorships or any firm that consists of 2 partners or fewer professionals.  To access the peer review letters, go to https://peerreview.aicpa.org/ .

As the DOL continues to ratchet up its enforcement against substandard audits of employee benefit plans, it is important that plan administrators and trustees do their due diligence in the DOL-recommended categories above when selecting the proper CPA firm for the job.

Contact Buchbinder Employee Benefit Plan specialists today if you have any questions about recent notices from the U.S. Department of Labor, or regarding your plan’s most recent audit.  To receive the latest articles and news in employee benefit plans, subscribe to our Employee Benefit Update newsletter.

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