New DOL Study Uncovers Plan Audit Issues

The U.S. Department of Labor's (DOL) Employee Benefits Security Administration (EBSA) published a report last month on the quality of benefit plan audits performed by CPA firms.

See also 401(K) Plan Audits

The U.S. Department of Labor's (DOL) Employee Benefits Security Administration (EBSA) published a report last month on the quality of benefit plan audits performed by CPA firms. The study was conducted using data from IRS Form 5500’s filed with the DOL dating back to 2011 looking at plans with a wide range of assets and total plan participants.  It provided interesting insight into the quality of level of plan audits being provided to companies. Unfortunately, the findings revealed that the many of the plan audits being conducted are being done with a high degree of deficiencies and errors. To resolve the situation, the DOL has suggested that new regulations be created to more closely monitor the accounting profession and the audits. To help clients, prospects and others understand the report and its implications; Hanson & Company has provided a summary below.

Study Summary

In the study the DOL discovered that the most of the deficiencies were specifically related to benefit plan audit items. In other words, it was not general audit errors that were uncovered, but those that specifically relate to retirement plan audits. For example, the report identified the primary issues occurred in the following areas; testing contributions, payments, participant data and party-in-interest and prohibited transactions. When standards were not met the failure was attributed to lack of education about EBP audits or failure to properly utilize technical materials during the engagement.

Of the 400 audits that were examined the following was discovered:

  • 61% of the audits fully complied with auditing standards
  • 39% had one or more major auditing deficiencies
  • Roughly 76% of the deficiencies originated from firms that performed only one or two EPB audits annually and were not members of AICPA Employee Benefit Plan Audit Quality Center
  • Firms that are members of the American Institute of CPAs (AICPA) Employee Benefit Plan Audit Quality Center (EBPAQC) performed a higher level of work than nonmember firms

Audit Quality Improvement

To help address the shortcomings uncovered in the study, the DOL has suggested that several changes be made in regulation to ensure auditors are held to a higher standard. Not only will this ensure a reduction in errors but also provide a higher level of assurance to retirement plan participants about the quality of their plan’s processes. The suggested changes include:

  • Revise case targeting to focus on CPA firms with smaller EBP audit practices that audit plans with large amounts of plan assets, as well as CPA firms that audit 25 to 99 EBP audits.
  • Work with the both the AICPA and National Association of State Boards of Accountancy (NASBA) to improve the investigation and sanctioning process
  • Work with the peer-review staff of the AICPA to streamline the peer-review process and make it more responsive in improving EBP audit quality.
  • Assist with NASBA to encourage state boards of accountancy to require specific licensing requirements for CPAs who perform EBP audits.

Contact Us

The DOL study uncovers an alarming rise in issues with retirement plan audits. If your company is concerned about plan audit issues or would like to discuss concerns you have about your retirement plan audit, then contact Hanson & Company today. For additional information please call us at (303) 388-1010, or click here to contact us. We look forward to speaking with you soon.