In a recent message to retirement plan administrators, the Office of the Chief Accountant at the U.S. Department of Labor emphasized the importance of obtaining a quality audit from an experienced CPA firm.
Entitled, “A Message from the U.S. Department of Labor—The Importance of a Quality Benefit Plan Audit,” and sent by, “PlanForAuditQuality-EBSA,” to plan filers identified through the EFAST2 database, the purpose of the message was to emphasize each plan administrator’s critical responsibility for hiring a quality audit firm in order to safeguard plan assets and to ensure compliance with ERISA requirements. What’s more, the message urged plan administrators to exercise care in selecting a CPA firm that possesses the requisite knowledge of plan audit requirements and one that also has the expertise to perform audits in accordance with professional auditing standards.
To that end, the DOL has suggested that plan administrators consider these factors in ascertaining the qualifications of a CPA firm:
- The number of employee benefit plans the CPA audits each year, including the types of plans
Look for a firm that audits hundreds, not just scores, of benefit plans each year and that specializes in the type of benefit plan that you offer , be it defined contribution plan such as a 401(k) or 403(b) plan, a defined benefit plan, voluntary health and welfare plan, ESOP plan, or money purchase plans. - The extent of specific annual training the CPA received in auditing plans
CPA firm staff members who work on employee benefit plans should be required to participate in annual employee benefit plan training programs. The best firms offer several different employee-benefit audit training sessions throughout the year, to ensure that staff members receive education that’s appropriate for their level of experience. - The status of the CPA’s license with the applicable state board of accountancy
All staff members of a firm who work on benefit plans should be licensed in the applicable state to perform the audits, as should the firm itself. - Whether the CPA has been the subject of any prior DOL findings or referrals, or has been referred to the state board of accountancy or the American Institute of CPAs for investigation
Select a firm whose CPAs have never been the subject of any prior DOL findings or referrals, and that have not been referred to either the state board of accountancy or to the AICPA for investigation.
- Whether the CPA’s employee benefit plan audit work has recently been reviewed by another CPA (called a Peer Review), and if so, whether such review resulted in negative findings.
Firms should conduct a robust peer review every three years, in accordance with AICPA standards. This peer review should include a review of the firm’s employee benefit plan practice, and should not result in negative findings or report modifications.
In choosing a high-quality CPA firm as your benefit plan auditor, you are demonstrating your commitment to your plan participants while meeting your fiduciary responsibility.
Jean Close is a partner based out of our Rochester, NY office.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
