EBPAQC Alert No. 304

DOL Audit Quality Study; EBPAQC Testifies on Missing and Lost Participants; Internal Control Communications Examples; FAQs on AICPA Independence Rules Affiliate Definition; Member-to-Member Discussion Forum; December EBP Conference
September 4, 2013
EBPAQC Alert #304
In This Alert
DOL to Conduct Audit Quality Study of ERISA Plans
EBPAQC Testifies Before ERISA Advisory Council on Missing and Lost Participants
Helpful Resources for Internal Control Communications
FAQs on Application of the Independence Rules
Member-to-Member Discussion Forum
December EBP Conference
Additional Resources
EAlerts (archived)
Live Forum webinars (archived)
Resource Centers
EBP Products at the AICPA Store
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Dear Center Members
DOL to Conduct Audit Quality Study
The Office of the Chief Accountant (OCA) of the DOL's Employee Benefit Security Administration will be performing a statistical assessment of the quality of audit work performed by independent auditors of ERISA plan financial statements for the 2011 plan filing year. The OCA will select and review a statistical sample of 400 ERISA audits for compliance with professional standards and ERISA reporting and disclosure requirements. The sample will be stratified based on the number of ERISA audits performed by audit firms. According to the DOL EFAST database approximately 7,300 CPA firms performed over 83,000 ERISA audits in the 2011 plan filing year. This includes approximately 3,700 CPA firms that performed only one or two ERISA audits, and approximately 1,500 CPA firms that perform between three and five ERISA audits. Accordingly, it is expected that almost half the audits selected for review will have been performed by firms with very few ERISA audits.

Beginning in September the OCA expects to send letters to sponsors of selected plans requesting the sponsor have the plan auditor send copies of the audit workpapers to the OCA's offices for review. The OCA does not anticipate the need to visit the plan sponsor's or auditors' offices to conduct its review. The OCA will ask plan sponsors to respond to the inquiry letter within 15 days and encourages plan sponsors and auditors to contact them with any questions.

The most recent published DOL audit quality study was of the 1992 plan filing year (Assessment of the Quality of Employee Benefit Plan Audits, March 1997).

Here are a few tips if your plan audit is selected for review:
  • Communicate with your client to ensure they understand that the audit was selected for review as part of an audit quality study, and is not part of a DOL investigation or enforcement effort.
  • Have your plan client notify the OCA as soon as possible if your firm is not able to respond timely.
  • Review the guidance in AU-C Section 230 Audit Documentation, and AU-C 9230 Interpretation 1, Providing Access to or Copies of Audit Documentation to a Regulator.
EBPAQC Testifies Before ERISA Advisory Council on Missing and Lost Participants
EBPAQC Executive Committee member Jim Haubrock recently testified before the ERISA Advisory Council in hearings focused on connecting missing and lost participants (Lost Participants) with their benefits. Plan representatives and auditors face accounting and auditing issues involving Lost Participants, including how to account for unclaimed benefits and stale uncashed benefit checks. While historically the total dollar amount of unclaimed benefits and uncashed checks in employee benefit plans generally has not been significant, recent trends are contributing to an increase in unclaimed benefits and uncashed checks to participants and beneficiaries. These trends include plans providing for automatic enrollment in 401(k) plans, employees holding multiple jobs during their careers and leaving their retirement accounts with their ex-employer when they change jobs, and employers' automatic distributions of former employee account balances of less than $1,000. As a result of these trends, the amount of unclaimed benefits and uncashed checks has become quite large in some plans, and there is an increasing likelihood that the amounts will continue to increase in even more plans. Many plan sponsors may not even be aware that participants or beneficiaries have not cashed their benefit checks. Uncashed checks may go undetected indefinitely or until there is a significant plan change, such as a change in service provider or plan termination.

The EBPAQC made several recommendations to the Advisory Council, including the DOL should issue guidance clarifying whether uncashed checks are considered plan assets under ERISA, the DOL should issue guidance clarifying how unclaimed benefits and uncashed checks should be reported in the Form 5500, and the DOL should clarify the plan sponsor's (fiduciary) responsibility for following up on unclaimed benefits and uncashed benefit checks.

Click here for the EBPAQC testimony on Missing and Lost Participants.

Click here for the ERISA Advisory Council website.
Helpful Resources for Internal Control Communications

The Center has developed a helpful non-authoritative tool to assist in preparing internal control communications as required by AU-C 265 Communicating Internal Control Related Matters Identified in an Audit (AU-C 265). AU-C 265 requires the auditor to communicate to management and those charged with governance in writing, significant deficiencies and material weaknesses identified during the plan financial statement audit. Auditors have up to 60 days after the audit report release date to make this written communication. Examples of Internal Control Communications for Employee Benefit Plans contains illustrative comments that may be useful in preparing AU-C 265 communications, management letters, and other internal control communications.

As part of the Clarified Audit Standards, AU-C 265 added the requirement to include in the written communication an explanation of the potential effects of the significant deficiencies and material weaknesses identified.

The Center also has available several plan advisories that address auditor communications and internal control. These plan advisories are intended for plan sponsors, administrators, and include:

  • Understanding Auditor Communications helps plans understand communications from their plan auditors;
  • The Importance of Internal Controls in Financial Reporting and Safeguarding Plan Assets helps plans understand their responsibilities for establishing, maintaining, and monitoring internal controls; and
  • Effective Monitoring of Outsourced Plan Recordkeeping and Reporting Functions helps plans understand their responsibilities for monitoring their TPAs/vendors.
The Center encourages you to share these plan advisories with your clients.
Frequently Asked Questions on Application of the Independence Rules to Affiliates of Employee Benefit Plans

The AICPA Professional Ethics Division recently issued Frequently Asked Questions on Application of the Independence Rules to Affiliates of Employee Benefit Plans to help members better understand how the definitions and guidance provided in Interpretation No. 101-18, "Application of the Independence Rules to Affiliates," under Rule 101, Independence, apply to affiliates of ERISA employee benefit plans. Interpretation No. 101-18 is effective for engagements covering periods beginning on or after January 1, 2014. The FAQs provide non-authoritative answers to members' inquiries concerning which entities should be considered an affiliate of a financial statement attest client and, therefore, subject to the same independence provisions of the AICPA Code of Professional Conduct applicable to the financial statement attest client.

In addition to this FAQ document, members may find the non-authoritative DOL and AICPA Independence Rule Comparison of assistance in understanding where the AICPA staff believes the DOL may be more restrictive than the AICPA. Click here for the DOL and AICPA Independence Rule Comparison.

Member-to-Member Discussion Forum

Thank you to all members who participate and help other members on the EBPAQC Member-to-Member Discussion Forum. The forum has more than 3,600 registered users and over 2,400 topics.

Congratulations to Jennifer Patschke with Melton & Melton LLP in Houston, TX who won a free registration to an AICPA Employee Benefit Plan Conference for answering another member's question, and to Toby Smith with Trinity Accounting Group in Athens, GA who won a $200 gift card for posting a question on the forum. Center members are encouraged to regularly visit the forum to learn what other members are "talking" about and to share your views, experiences and questions to help build a support group among EBP audit peers.

Check out the EBPAQC Member-to-Member Online Forum and find out what the current member "buzz" is in EBP auditing. The Forum is easy to use and can provide you with a wealth of information and the opportunity to share best practices and discuss issues with other member firms.

Use the EBPAQC Online Forum by October 15, 2013 for a chance to win a free EBP Conference registration or a $200 gift certificate! See details below.

  • Help a member by responding to a member posting on the Center Member-to-Member Forum and you will be automatically entered for a chance to win a free registration for the December 12-13, 2013 AICPA Employee Benefit Plans Accounting, Auditing and Regulatory Update Conference in Washington, D.C.
  • Post a new discussion topic on the Forum and you will be automatically entered to win a $200 gift card.
Click here to enter the EBPAQC Member-to-Member Forum (member sign-in required to access the Forum).
December 12-13 Employee Benefits Plan Accounting, Auditing and Regulatory Update Conference (with Virtual Attendance option)

The AICPA Employee Benefits Plan Accounting, Auditing, and Regulatory Update Conference will be held at the Renaissance Washington in Washington, DC on December 12-13, 2013. In addition to attending this conference on-site, an on-line, virtual conference option is available this year that allows you to attend the conference remotely, in real-time. All content for this conference will be available to you, and you will earn CPE credit for all sessions that you attend virtually. It's a great way to save on travel expenses while still experiencing the conference material.

Register by October 28 to receive the early bird discount of $75, as well as an additional $100 EBPAQC member discount. Be sure to enter the coupon code "EBPAQC13" during the online registration process to receive the entire $175 savings.

Click here to register.

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