Member firms of the American Institute of Certified Public Accountants (AICPA)’s Employee Benefit Plan Audit Quality Center (EBPAQC) fared better in the 2014 Study than non-members. The audit deficiency rate for nonmembers was 82.3%. EBPAQC members had a 30% audit deficiency rate. On average, EBPAQC member firms also had fewer audits with multiple GAAS deficiencies.
scope audits in the 2014 Study contained audit deficiencies, and as a result, EBSA is recommending changes to the limited scope reporting process. Currently, CPAs do not issue an opinion on financial statements for assets held by regulated entities (often financial institutions) in a limited scope audit. In the 2014 Study, EBSA recommended a repeal of the limited scope exemption.
Changes Coming The 2014 Study has ramifications for everyone involved with benefit plan financial statements and will undoubtedly trigger changes to the EBP reporting process. Staying on top of these changes will be critical for your future benefit plan compliance.
Linda Lauer is a Lead Managing Director in the Memphis office of CBIZ & MHM, where she also serves as Co-Attest Practice Leader and the leader of EBP audit practice. Linda has more than 25 years of experience with accounting and employee benefit plan administration. She previously served as the Manager of Retirement Administration for FedEx where she oversaw plans for more than 200,000 participants.
Response from the Regulators EBSA recommends that in light of the 2014 findings, enforcement efforts should target CPA firms with small EBP audit practices that audit EBPs with large amounts of plan assets. Firms that performed between 25 and 99 audits per year had audited financial statements that accounted for roughly $317.1 billion of plan assets and had a 41% audit deficiency rate in the 2014 Study. The 2014 Study also proposes several changes be made to ERISA. One would be to expand the definition of qualified public accountant to include additional requirements EBP auditors must meet. EBSA would also like to have the power to establish accounting and auditing standards that are specific to EBPs or have a substantial effect on them. Currently, accounting standards for EBPs are established by the Financial Accounting Standards Board (FASB) and auditing standards for EBPs are established by the AICPA.
Implications for Plan Sponsors Responsibility falls to the plan sponsor to verify that both their plan reporting and the audited financial statement are complete and accurate. Plan sponsors can end up with fines if the DOL finds that work contains GAAS deficiencies. As accounting firms and regulators double down on their efforts to improve quality, plan sponsors should be evaluating the quality of their plan auditor. In addition to how well their accounting provider meets the indicators of EBP audit quality—high number of EBP audits performed per year, member of the EBPAQC, etc.—plan sponsors should also be considering the likely areas for DOL scrutiny. For example, accounting firms that handle large amounts of assets and perform fewer than 25 audits per year will likely be under the DOL’s magnifying glass in the coming years based on the recommendations EBSA made in its report. Plan sponsors may find if their auditor falls in that stratum, their EBP audit is more likely to be subject to review by the DOL.
Linda Lauer Lead Managing Director CBIZ & MHM email@example.com www.cbiz.com
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Consideration should also be paid to the type of EBP audit received. If the plan currently elects to do a limited scope audit, now may be the time to consider doing a full scope audit. Close to 60% of the limited www.HRProfessionalsMagazine.com