At Herbein + Company, Inc., we understand the complex laws and compliance obligations imposed by the regulatory authorities over employee benefit plans. Our employee benefit plan audit team is comprised of technical and highly trained individuals who provide quality audit and technical expertise to our clients. Each year, our team attends various trainings to remain abreast to the industry trends and technical matters impacting employee benefit plans. Herbein + Company, Inc. is a member of the AICPA’s Employee Benefit Plan Audit Quality Center which is a valuable resource to our team. In addition, we have earned unqualified peer reviews since our first in 1982.
Recently, the U.S. Department of Labor (DOL) conducted a study on the quality of employee benefit plan audits performed by independent certified public accountants. The study took a sample of 400 retirement plan audits from a population of approximately 81,000 Form 5500 filings for 2011 in which an audit opinion was attached.
The sample was divided into six strata based on the number of plan audits performed by the CPA firm. The results report a direct correlation between the number of employee benefit plan audits performed by the CPA and the quality of the work performed. The report indicates that more than 75% of plan audits were deficit in firms that completed 1 – 2 plans and that 95% of CPA firms audit fewer than 25 plans. Firms with a higher number of plan audits are shown to have fewer instances of multiple deficiencies. In addition, the DOL noted that firms who are members of the AICPA’s Employee Benefit Plan Audit Quality Center have fewer instances of multiple deficiencies than non-members.
|# of Plans||Deficient Audit %|
|1 – 2||75.8%|
|3 – 5||68.4%|
|6 – 24||67.4%|
|25 – 99||41.5%|
|100 – 749||12.0%|
The DOL study reports that CPA firms who audit a limited number of employee benefit plans do not have the level of experience or knowledge to perform audits that comply with professional standards. This fact can subject plans to penalties or litigation.
One cause identified by the DOL is the “limited-scope audit” which the DOL believes allows auditors to perform lower quality work because they are not expressing an opinion on the financial statements. The American Institute of CPA’s (AICPA) has supported the elimination of this option.
Selection of a quality auditor is a responsibility of the plan administrator of the employee benefit plan. Federal law, Employee Retirement Income Security Act of 1974 (ERISA), requires employee benefit plans with 100 or more participants (and in some cases 120 or more participants) to have an annual audit in connection with the annual filing of the Form 5500. A quality auditor will ensure the plan is in compliance with regulatory requirements and will also assist management in improving processes to minimize errors in plan operations.
Herbein + Company, Inc. has an extensive list of defined benefit and defined contribution employee benefit plans in which we audit. Additionally, Herbein + Company, Inc. prepares the annual Form 5500 for a number of these plans. We are committed to continued education of our employee benefit plan team to ensure the highest level of quality and technical expertise to our clients.
To review the DOL’s report on audit quality, click here: