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Audit & Assurance, Employee Benefit Services

2020 Plan Year DOL Audit Quality Assessment

The DOL Employee Benefits Security Administration (EBSA) Office of the Chief Accountant (OCA) is preparing to conduct a quality assessment to analyze the audit work performed by independent qualified public accountants (IQPAs or auditors). They will be focusing on financial statement audits of employee benefit plans covered by the Employee Retirement Income Security Act of 1974 (ERISA) for the 2020 Form 5500 filing year. This includes filings submitted by October 15, 2021, for the calendar year 2020.

The EBSA OCA is currently establishing sample procedures of plans and intends to begin communicating with plan administrators and IQPA or auditing companies later this year. If an IQPA or auditing company is chosen for review, the IQPA or auditor will be required to supply the EBSA OCA with a complete set of audit paperwork supporting the audit, including all documentation and work papers stored in other relevant files.

IQPAs or auditors should double-check that their audits are properly documented. They should have a record of the auditing processes used, evidence gathered, and conclusions made by the IQPA or auditor during the engagement.

According to AU-C Section 230, Audit Documentation, audit documentation presents evidence on which the auditor has based their conclusion regarding the achievement of the auditor’s overall objectives, as well as evidence that the audit was planned and performed in compliance with the auditing standards (GAAS) and pertinent legal and regulatory requirements.

ERISA Employee Benefit Plan Audits

It is important to review recommended procedures and frequent flaws in ERISA EBP audits and to follow the best practices for each step of the audit engagement. Expert advice is essential for creating successful quality control policies and procedures relevant to your EBP audit business.

Take the time to understand the most frequent EBP audit deficiencies by plan type, with references to audit methods in the AICPA Audit and Accounting Guide, Employee Benefit Plans, as well as links to other tools and resources.

Summary of DOL Employee Benefit Plan Audits 2011

According to a 2011 survey, roughly four out of ten audits had serious flaws. The Department of Labor submitted audits with deficiencies to the appropriate state board of accountancy and the AICPA Ethics Committee. Here are some important findings from the 2011 assessment.

The EBSA assessment determined that 61% of the audits were completely compliant with professional auditing standards or had minor flaws. However, almost 4 out of 10 had severe deficiencies, representing an increase when compared to previous EBSA studies. These deficiencies place $653 billion and 22.5 million plan members and beneficiaries at risk.

In addition, the audit examination backs up the following conclusions:

  • The number of employee benefit plan audits done by a CPA and the quality of the audit work performed have a direct correlation. According to the statistics, there is a significant difference between CPAs who do fewer plan audits and those who undertake more plan audits. CPAs who completed the fewest employee benefit plan audits each year had a deficiency rate of 76%. On the other hand, businesses that performed the most plan audits only had a 12% deficiency rate.
  • Peer review and practice monitoring initiatives by the accounting profession have not resulted in enhanced audit quality or improved detection of poor audit engagements. A significant percentage of CPA firms obtained a satisfactory peer review report in four of the six audit categories but had deficiencies in the audit work that EBSA evaluated.
  • CPA companies that were members of the Employee Benefit Plan Audit Quality Center of the AICPA tended to provide audits with fewer audit faults.
  • The training aimed primarily at audits of employee benefit plans (EBPs) might help improve audit results. The percentage of audits that were inadequate decreased as the degree of EBP-specific training rose.
  • 17% of the plan audit reports examined failed to meet one or more of ERISA’s reporting and disclosure criteria.

Recommendations Based on 2011 DOL Employee Benefit Plan Audits

Here are some of the suggestions offered by EBSA based on the 2011 DOL Quality Audit.

  • Focus on CPA firms with smaller employee benefit plan audit practices, than audit plans with large amounts of plan assets and CPA firms in the 25-99 plan audit strata because of their high deficiency rates.
  • Collaborate with the National Association of State Boards of Accountancy (NASBA) and the American Institute of Certified Public Accountants (AICPA) to enhance the investigation and sanctions process for CPAs who do significantly subpar audit work.
  • Amend ERISA to ensure that the civil penalties for yearly reporting are focused on the accountable party.
  • Collaborate with the AICPA’s Peer Review team to enhance the quality of employee benefit plan audits by streamlining the peer review process. Make it more responsive when verifying that CPAs who are obliged to have a peer review have had one that was satisfactory. It will also help identify CPAs who have not obtained acceptable peer reviews and send them to the appropriate state accounting licensing boards.
  • Inform each of the state boards of accountancy (license boards) of the study’s findings and the need to ensure that only qualified CPAs undertake employee benefit plan audits.
  • Increase EBSA’s outreach to specific state societies of CPAs that undertake a high number of plan audits in the 1-5 plan audit strata. Encourage states to establish employee benefit plan audit training programs if they have not previously.

Windes: Unparalleled Experience in Employee Benefit Plans Audits

For over 40 years, Windes has been providing employee benefit services, and professional quality audits that plan sponsors require for complying with complex rules imposed by the US Department of Labor (DOL) and the IRS.

We are a member of the AICPA Employee Benefit Plan Audit Quality Center, a membership center for qualifying CPA firms that do employee benefit plan audits, and we attend the annual AICPA Employee Benefit Plan Conference to stay current in our area. Connect with us today to learn more about DOL employee benefit plan audits.


Lisa Carrick
Lisa Carrick, CPA

Partner, ERISA Practice Lead, Audit & Assurance Services
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