Audit Quality and Auditor Selection
Generally, Federal law requires employee benefit plans with 100 or more participants to have an audit as part of their obligation to file an annual return/report (Form 5500 Series). If an employee benefit plan is required to have an audit, one of the most important duties of the plan administrator is to hire an independent auditor for the plan. A quality audit helps ensure the financial integrity of a plan and protect plan assets. A quality audit also will help a plan administrator carry out its legal responsibility to file a complete and accurate annual return/report for the plan each year.
DOL's Employee Benefit Plan Audit Quality Enforcement Program
The U.S. Department of Labor's (DOL) Employee Benefits Security Administration (EBSA) has instituted an enforcement initiative to monitor the quality of ERISA audits.
In recent years, the DOL EBSA has significantly stepped up its enforcement of the audit requirement for employee benefit plans. The DOL has the right to assess penalties of over $2,000 per day, without limit, on plan administrators for deficient filings. Because an incomplete, inadequate, or untimely audit report may result in penalties being assessed against you as the plans administrator, selection of an experienced and reliable auditor is very important.
DOL Guidance on Selecting a Plan Auditor
The DOL has developed guidance to assist plan administrators in selecting an auditor and reviewing the audit work and report. This guidance discusses why the choice of an auditor is important, plan auditor qualifications, the importance of experience in auditing employee benefit plans, requesting references and checking licenses, importance of the audit engagement letter, audit scope, what happens when the audit is complete, and suggests questions the plan administrator should ask the auditor about his/her work.
Employee Benefit Plan Audit Quality Center Membership
Center firm members are committed to providing quality audit services to their clients by voluntarily adhering to Center membership requirements, including practice management practices of additional training, quality control, and self-monitoring. Center members also agree to make publicly available the results of their external peer review of their audit practice. In addition to providing quality audit services, these firms may also offer professional services to plans including compliance testing, participant and government reporting, consulting services for plan selection, distributions and retirement planning, plan recordkeeping and accounting, and other services.
To find member firms and learn more about membership in the Center, please visit the Center Membership area of the Center Web site.
Obtaining Quality Employee Benefit Plan Audit Services
The Center has prepared a document titled Obtaining Quality Employee Benefit Plan Audit Services: The Request for Proposal and Auditor Evaluation Process to assist plan sponsors and other stakeholders in the proposal and evaluation process to obtain quality audit services for employee benefit plans. It addresses each step of the proposal process, contains a checklist of items that should be considered in preparing the RFP, discusses the proposal evaluation and auditor selection process, and provides information about how to find an auditor.