Audit Requirements and Responsibilities
Employee benefit plans are regulated entities and, as such, certain special audit requirements and responsibilities generally apply, as discussed below.
ERISA contains a requirement for annual audits of plan financial statements by an independent qualified public accountant. Generally, plans with 100 or more participants are subject to the audit requirement. The Department of Labor's (DOL) regulation (29 CFR 2520.104–46) establishes conditions for small employee benefit plans (generally those with fewer than 100 participants) to be exempt from the general requirement that plans be audited each year. The DOL amended the regulation in October 2000 to impose additional conditions for small pension plans to be exempt from the annual audit requirement. The amendments went into effect beginning in 2001.
The independent auditor's objective and responsibility, under generally accepted auditing standards (GAAS), are to express an opinion on whether the financial statements are fairly presented in conformity with generally accepted accounting principles, and that the related supplemental information is presented fairly, in all material respects, when considered in conjunction with the financial statements taken as a whole. Although the audit requirement in ERISA is an important part of the total process designed to protect plan participants, a GAAS audit is not designed to ensure compliance with ERISA's provisions. Under the law, plan administrators, the IRS and the DOL have responsibility to ensure such compliance.
Generally, the plan's audited financial statements accompany the Form 5500 that is filed by the plan administrator. Form 5500 requires footnote disclosure of any differences between the audited financial statements and the statements included as part of the Form 5500. The DOL may reject a filing that has a deficient financial statement audit or that does not properly reconcile information contained in the financial statements with information contained in the Form 5500