Employee Benefit Plan (EBP) audit providers conduct over 80,000 audits each year. A recent Department of Labor (DOL) study analyzed the quality of employee benefit plan audit work done by CPA firms, and the results may be alarming to some employers.
The DOL study analyzed the quality of benefit plan audit work performed by 232 firms nationwide. The study found that there was a direct correlation between the number of audits the CPA firm completed per year and the percentage of deficient audit work. Audit deficiencies put the plan sponsor at risk of being audited further.
Looking at the findings in terms of the CPA firm’s level of frequency performing EBP audits:
- Among firms that performed 1-2 EBP audits per year 75.8% of audits were deficient
- Firms that performed 6-24 audits saw 68.4% deficiency rate,
- Firms that performed 25-99 audits still had a 41.5% deficient rate
- Firms that performed more than 100 EBP audits per year only saw 12% deficient audit plans.
The DOL concluded that auditors who perform fewer audits throughout the year have less familiarity with the standards that the DOL sets. By working with an auditor who is experienced in performing 100+ audits per year, you dramatically improve the quality of the audit and therefore are more likely to avoiding penalties from the DOL.
The implication is clear. Firms that have specialists who do plan audits all year long, rather than those who do plan audits as summer “filler” work, are a better choice to manage the risk of DOL compliance issues.
Read the DOL’s entire findings here.
Frazier & Deeter’s employee benefit plan services group is comprised of dedicated ERISA specialists who go beyond providing just the audit of the plan’s financial statements. They fully understand the responsibility and risk that the plan fiduciary faces and continually stay abreast of all current industry developments. To find out more about selecting an auditor, watch our video.