A startling report by the EBPAQC (Employee Benefit Plan Audit Quality Center) found deficiencies in 39% of the 400 audits reviewed by the Department of Labor (DOL), highlighting the importance of selecting a qualified employee benefit plan auditor. The more common deficiencies detailed in the lengthy list include:
- No audit work performed or audit documentation of testing participant accounts
- Testing of payroll data was insufficient
- No testing of participant eligibility or forfeitures
- No testing of investment income allocation to participants
- Inadequate or missing documentation
- Failure to disclose tax years that remain subject to examination by major tax jurisdictions
If you are responsible for your company’s employee benefit plan audit, the last thing you need is to have your plan found deficient. The DOL has stiff penalties if your audit doesn’t meet their approvals and you could face fines in excess of $1,000 a day until an amended audit is submitted.
Finding the right auditor is crucial. Not every public accounting firm has an experienced employee benefit plan audit team to manage the audit correctly.
Lori Pittman, CPA, Audit Shareholder, suggests making the following considerations when selecting an employee benefit plan auditor:
- Price isn’t an indicator of quality. “We understand clients have budgets to manage. But awarding your employee benefit plan audit to the lowest cost provider isn’t necessarily going to be the best idea,” says Pittman. Employee benefit plan fees may fluctuate from year to year depending on what is going on within a plan.
- Look for the right blend of experience and credentials. The DOL study found that CPAs performing the most plan audits had a deficiency rate of 12% while firms performing only a few plan audits had a 76% deficiency rate. “That disparity really speaks to the importance of working with a firm who specializes in doing employee benefit plan audits.” Firms that are members of the AICPA Benefit Plan Audit Quality Center have met certain requirements including continuing professional education specific to EBPs.
- Build a simple RFP (Request for Proposals). You’ll want to include the details about your plan including the year-end date, size, trustee information and any other helpful details. Ask specific questions about the auditor’s experience, credentials, references and EBP leadership in their respective firm. Include a contact name from your organization for additional information.
There are certainly several factors to consider when selecting an EPB auditor. Mize Houser’s employee benefit plan auditors in Topeka and Overland Park invest in professional education and resources to work with clients needing employee benefit plan audits.