As the deadline for filing the company’s Form 5500 and conducting a benefit plan audit approaches many companies are considering if they want to change plan audit firms.
See also 401(K) Plan Audits
Whether it’s high fees, less than optimal service, or quality concerns, considering changes from time to time are a good idea. However, it can be difficult for a company to “see” the difference between audit firms and what they bring to the table. Even more difficult is to identify audit quality difference from one firm to another. In a recent study conducted by the Department of Labor (DOL), Assessing the Quality of Employee Benefit Plan Audits, it was discovered that 39% of audits reviewed had significant issues. According to the study, experience in plan audits was the driving force, as firms that audited less than 10 plans per year were the source of most issues. To help clients, prospects and others identify the key questions to ask their potential employee benefit plan auditor, Hanson & Co., has provided a summary below.
Experience – Because the DOL study identified that most of the audit issues were a result of inexperience, this is perhaps the most critical area to assess. When speaking with potential audit firms, discover how many plans they audit. In addition, inquire about the types of plans audited. If your company has more complex ESOPs or defined benefit plans, then you will want to select an auditor who has experience with those types of audits.
Staff Training – Most firms will have an experienced partner or manager involved in the initial discussions when trying to win business. However, for most firms, less experienced audit staff are the ones completing a significant amount of the day-to-day work. For this reason, it’s essential to uncover how much annual training staff members receive – specifically on benefit plans. This is important because the company needs to be sure that assigned staff has adequate knowledge to execute the plan audit testing.
DOL Findings/Investigations – Although it’s rare for an audit firm to be subjected to a DOL investigation, it’s important to ask this question of your potential auditor upfront to ensure that proper due diligence has been conducted. Remember that if a firm is under a DOL investigation or has a finding, it reflects the fact that there are serious quality issues with their work.
Peer Review – Discover whether the firm’s benefit plan audit work has undergone a peer review by another firm. This is essential because it provides feedback and direction about how the firm is performing and any areas for improvement to their plan audit process. Also inquire about whether or not there were negative findings. If so, determine what steps were taken to remedy open issues.
Service – This is one of the most practical topics to consider. It’s important to understand the level of service the company can expect to receive before, during and after the audit. Will the company be able to access a partner or manager to address questions, issues or concerns? Does the firm stick to an established deadline or routinely need to change them? These are important questions to address when assessing providers.
Understanding the difference between plan audit firms is essential when selecting a new auditor. Remember that price is not necessarily reflective of quality. If your company is considering changing plan auditors or you have questions, then Hanson & Co., wants to help. For additional information call us at (303) 388-1010, or click here to contact us. We look forward to hearing from you soon.