As a plan administrator, you are likely in the process of renewing your existing audit contracts or are busy reviewing proposals, which is why the Department of Labor (DOL) recently sent out a letter urging plan administrators to remember the importance of taking great care when selecting an employee benefit plan audit professional. Why? Because these audits have unique requirements and the cost of non-compliance can be significant to you and your organization. The letter being sent to plan administrators states:
“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. Substandard audit work can be costly to plan administrators and sponsors. It both jeopardizes plan assets and can result in significant civil penalties being imposed on the plan administrator by the DOL.”
What can you do to protect your company from non-compliance issues that may result from choosing the wrong team to conduct your employee benefit plan audit? The first step is to thoroughly and completely vet the team and CPA firm vying for your business. You can do this by making sure the firm you are considering:
- Has a licensed team dedicated to performing ERISA audits
- Has received the technical training necessary to conduct ERISA audits
- Has an established quality review process
- Has worked on a large number of ERISA audits and has established a track record of success
- Is a member of the American Institute of CPA’s Employee Benefit Plan Audit Quality Center, which means they adhere to higher standards of audit quality in their policies, procedures and training related to the performance of their benefit plan audits and demonstrates their overall commitment to providing you with high-quality audit service
- Is focused on delivering excellent client service throughout the entire audit process. In doing so, your audit team should not only be able to provide you with answers to your questions, they should provide you with valuable feedback relating to internal control processes and procedures to help you improve your company’s efficiency. They should also be able to verify whether your plan is in compliance with laws and regulations.
If the team you are considering cannot adhere to the points above, you may want to reconsider working with them.
Earlier this year, the DOL released findings that found the quality of audit work performed by independent qualified public accountants to be lacking. The report found that nearly 40 percent of the audits the department reviewed failed to comply with professional auditing standards. Benefit plans that are found to be non-compliant are at risk of the DOL rejecting your plan’s Form 5500 filing. If the DOL rejects your filing, your company could incur DOL filing penalties of up to $1,100 per day from the original due date of your return. Furthermore, you could face personal liability as the fiduciary of your company’s benefit plan.
The fact that there are so many subpar plan audits being conducted is simply unacceptable and I hope more plan administrators will not only take more time when choosing which team will conduct their employee benefit plan audits, but will hold them accountable every step of the way. Frankly, you can’t afford not to.
Do you have questions about your company’s upcoming benefit plan audit or about the quality of your company’s previous audits? Email Rea & Associates and request to speak with an experienced employee benefit plan auditor. You can also check out the additional articles below to learn more your role in the benefit plan audit process.
By Darlene Finzer, CPA, QKA, CSA (New Philadelphia office)
This article originally appeared in AuditEase, a newsletter managed by Rea & Associates, Inc.
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