The Department of Labor recently issued a report on its study of the quality of employee benefit plan audits. The study focused on 400 plan audits attached to 2011 Form 5500 filings. The results were less than impressive. The study found the following:
- 39% of audits contained major deficiencies in terms of compliance with U.S. Generally Accepted Auditing Standards (GAAS)
- A clear link between the number of employee benefit plan audits performed by a CPA firm and the quality of audit work performed
- Firms who are members of the AICPA’s Employee Benefit Plan Audit Quality Center produced audits with fewer deficiencies
- Training specific to employee benefit plans contributed to better audit work
At BeachFleischman, we take audit quality seriously. Despite the fee pressures in the employee benefit plan audit market, we insist on performing each audit in accordance with GAAS, in an effort to help our clients meet their fiduciary responsibilities. Each audit is evaluated based on the size of the plan, complexity of the plan document, organization and availability of participant records, and prior audit experience. We utilize these factors to compute a fee that is fair for the amount of work required to complete the audit in accordance with GAAS.
We have had three audited financial statements selected for a desktop review by the Department of Labor in previous years. All of the reviews were successful and no deficiencies were found in our work by the Department of Labor auditors. BeachFleischman currently audits 65 employee benefit plans. These include traditional 401(k) or profit sharing plans, 403(b), Davis-Bacon, ESOPs, cash balance, and other defined benefit plans.
We have been a member of the AICPA’s Employee Benefit Plan Audit Quality Center since 2008. Every year we provide all of the individuals who work on employee benefit plans with 2-4 hours of training specific to audits of employee benefit plans. The Director of our Employee Benefit Plan Audit Group attends an average of 20 hours per year of training specific to employee benefit plans and continually provides technical advice to our audit teams when challenges arise. In addition, we consider this a niche practice area for our firm, so not everyone works in the niche.
BeachFleischman’s commitment to the employee benefit plan arena is clear. We even have a subsidiary company, Pinnacle Plan Design that is devoted solely to the design and administration of qualified retirement plans. The employee benefit plan experts at Pinnacle are national leaders in complex plan design and speak nationally about employee benefit plan issues. Best of all, our auditors always have in-house access to these experts at Pinnacle. Together, BeachFleischman and Pinnacle Plan Design were named an Inside Public Accounting All-Star Firm in the practice of employee benefits.
We encourage all Plan Sponsors to consider the results of this study as a reminder of the importance of finding and hiring a competent CPA firm to audit their employee benefit plan. There are risks to the Plan Sponsor if a quality audit is not performed, as the DOL can reject the Form 5500 and impose penalties of up to $1,100 per day.
We are confident that the resources we have dedicated to this practice area provide our people with the training, experience, and supervision necessary to produce a quality employee benefit plan audit in accordance with GAAS. If you have questions about the DOL report or our audit approach, please contact CariAnn Todd, the Director of our Employee Benefit Plan Audit group via email or directly at (682)203-6556.