By Robert J. Behr, CPA
The Department of Labor (DOL) is continuing to focus its efforts on improving the audit quality of employee benefit plans. During 2015, the DOL released a report called “Assessing the Quality of Employee Benefit Plan Audits” in which the agency reviewed 400 plan audits. As a result of this review, the DOL found that 40% of the audits contained major deficiencies. How do you know if you selected a qualified auditor for your employee benefit plan? If you are the plan administrator or trustee overseeing the auditor selection process, here are some key questions to ask when making this important decision.
How many employee benefit plans does your firm currently audit?
This is a valid question especially in light of the DOL’s recent scrutiny over the quality of employee benefit plan audits which indicated a clear link between the number of audits performed by CPA firms and the quality of audit work. Firms that performed 2 audits or less had a 76% deficiency rate in complying with generally accepted auditing standards and firms that performed between 3 and 5 audits had a 68% deficiency rate. This is particularly alarming considering that 71% of all employee benefit plan audits were performed by firms that did 5 or less audits per year.
Is your firm a member of the Employee Benefit Plan Audit Quality Center (EBPAQC)?
The EBPAQC is a voluntary membership through the American Institute of Certified Public Accountants (AICPA) created to improve the quality of employee benefit plan audits. The EBPAQC provides firms with access to news and publications, technical assistance and continuing education on employee benefit plans. While this is not a mandatory requirement for firms to perform employee benefit plan audits, it does demonstrate that a firm is dedicated and committed to being technically proficient in this specialized area. In addition, the DOL’s study found that firms that are members of the EBPAQC produce audits that have significantly fewer audit deficiencies. McClintock & Associates is a member of the EBPAQC.
What specific type of training does your firm provide for staff?
It is important to know that the firm you choose is knowledgeable of the DOL’s rules and regulations under the Employee Retirement Income Security Act of 1974 (ERISA) and that they invest the time and resources in training their staff to ensure you are receiving a quality audit. The DOL’s report noted that audit areas such as contributions, distributions, participant data and prohibited transactions had the highest audit deficiencies. McClintock & Associate staff supervising the employee benefit plan audits meet and often exceed the training requirements as set forth by the EBPAQC. In addition, our professional staff involved in the audits receives focused benefit training on an annual basis.
Has your firm ever been cited by the DOL for deficient employee benefit plan audits or investigated by the state board of accountancy or AICPA?
The DOL is in the process of working with the National Association of State Boards of Accountancy (NASBA) and the AICPA to improve the investigation and sanctioning process for firms who perform significantly deficient audit work. In addition, there have been recommendations to amend the ERISA laws in order to provide the Employee Benefits Security Administration with the authority over registration, suspension and debarment of employee benefit plan auditors and also give them the ability to levy civil penalties against auditors performing substandard audits. McClintock & Associates has never been referred to or cited by the DOL for a deficient employee benefit audit or been referred to any state board of accountancy or the AICPA for investigation.
McClintock & Associates has been providing consultation for and performing audits of employee benefit plans for over 20 years. If you have any questions regarding your plan, please contact Rob Behr at 412-257-5980 or RBehr@Mcclintockcpa.com
Volume 3, Issue 4