Is Your Retirement Plan Audit Getting a Passing Grade?

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The Department of Labor (DOL) is preparing to release the results of another audit quality study performed on audits of employee benefit plans.*  Based on comments made publicly, the report will show that audit quality continues to decline and is particularly poor when the auditor does not have retirement plan audit experience.  Hiring the plan auditor is a fiduciary function, and a common misconception among plan fiduciaries is that, if an audit is found to be deficient, the accounting firm that performed the work is somehow in trouble with the DOL. Surprisingly, this is not the case.  A deficient audit can subject the plan sponsor, not the accounting firm, to significant fines and penalties as authorized by Title I of the Employee Retirement Income Security Act of 1974 (ERISA).

Furthermore, under ERISA, failure to properly select and monitor service providers, including qualified auditors, exposes the plan administrator to potential fiduciary violations and civil penalties. The only real recourse the DOL has against auditors is to report the accounting firm to their state licensing board.

The DOL has stated that one of the main reasons these audits are deficient is the auditors’ lack of training and knowledge in areas unique to employee benefit plans.  Fiduciaries should understand the importance of prior experience when considering hiring a plan auditor for the first time or in deciding to continue with existing auditors.  The American Institute of Certified Public Accountants issued a plan advisory, “The Importance of Hiring a Quality Auditor to Perform Your Employee Benefit Plan Audit.”   This guide explains why your plan audit  is important and provides excellent information on what factors to consider in evaluating different audit firms.  It also provides an outline for developing a Request for Proposal (RFP).

The employee benefit plan audit season has begun.  If you have not taken the time to evaluate the qualifications of your plan auditor, consider doing so now before it is too late!

For questions about benefit plan audits, please contact Aronson partner Kathryn Petrillo at 301.231.6233 or kpetrillo@aronsonllc.com.

*ERISA generally requires employee benefit plans with 100 or more participants to have an independent financial statement audit.  The audit report must accompany the Form 5500 that is filed annually with the DOL.

About Kathryn Petrillo

Kathryn Petrillo has written 5 post in this blog.

As the partner in charge of Aronson LLC's Employee Benefit Plan Services Group, Kathryn Petrillo oversees the management of nearly 200 plan audits on an annual basis, one of the largest dedicated benefit plan practices in the region. Kate specializes in auditing and assurance services to employee benefit plans, with significant experience auditing defined contribution, defined benefit and health and welfare plans with assets ranging from $100,000 to over $2 billion. Kate's well-earned reputation for integrity, combined with her unique knowledge and skillset, has earned the trust of her diverse client base.

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