8 Tips For Hiring an Employee Benefit Plan Auditor

Employee Benefit Plan Audit | January 15, 2016 | Cassie Crist

The Department of Labor recently sent letters to employee benefit plan administrators who were in the process of selecting or working with a CPA firm to audit their plan’s financial statements.  The purpose of the letter was to make sure plan administrators had adequate information needed to hire a qualified CPA.

Surely the reason for the letter had something to do with the findings from a study conducted by the DOL in which they reported that a surprising 39% of employee benefit plan audits contained serious problems.

As the letter states, “substandard audit work can be costly to plan administrators and sponsors. It both jeopardizes plan assets and can result in significant civil penalties being imposed on the plan administrator by the DOL.”

Reviewing an auditor’s qualifications is a critical step in selecting a CPA firm. To protect your assets and the financial integrity of your plan, be sure to discuss the following with your current and potential plan auditors:

  1. How many employee benefit plans does your firm audit each year?
    As the DOL study shows, firms that audit less than 25 plans generally have higher deficiency rates. The more plans a firm audits, the higher their proficiency.
  2. What are the types of plans your firm audits?
    The firm should have ample experience conducting a variety of benefit plans, including the type of plan you need audited.
  3. Tell me about the training and continuing education your plan auditors receive annually.
    Quality CPA firms require their plan auditors to receive annual training specific to employee benefit plans. They also need to be aware of changes in regulations or federal requirements on an annual basis.
  4. What is the status of each of your plan auditor’s CPA license with your state board of accountancy?
    The lead accountants auditing your plan should be CPAs with licenses from your state board of accountancy.
  5. Are your plan auditors members of the AICPA’s Employee Benefit Plan Audit Quality Center?
    Although membership is voluntary, auditors and firms that participate are dedicated to improving and maintaining the overall quality of employee benefit plan audits.
  6. Has your firm ever been subject to any prior Department of Labor findings or referrals?
    If the answer is yes, this means the DOL identified a significant issue with the audit report. You should be aware of what those findings or referrals were and if it resulted in a resolution.
  7. Has your firm ever been referred to the state board of accountancy or the AICPA for investigation?
    If the answer is yes, you should be aware of what complaint was filed and what the status is of the complaint.
  8. Has your employee benefit plan audit work recently been reviewed by another CPA firm, and, if so, has that Peer Review resulted in negative findings?
    If the answer is yes, you should be aware of what those negative findings were and if there has been a resolution.

These eight discussion points are the minimum factors you should consider before choosing a quality CPA firm to conduct your plan audit. Additional tips on selecting a plan auditor are available on the DOL website. By hiring a qualified public accountant to conduct your employee benefit plan audit, you greatly reduce the risk of being penalized by the DOL for an incomplete or inadequate audit report.

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