The AICPA Employee Benefit Plan Audit Quality Center (EBPAQC) has published a plan advisory called “The Importance of Hiring a Quality Auditor to Perform Your Employee Benefit Plan Audit.” This advisory was created for plan administrators to have a guide to follow the important process of hiring an auditor with the correct experience to audit employee benefit plans.
As a reminder, most employee benefit plans with over 100 eligible employees are required to have an annual audit performed on the plan in order to comply with its Form 5500 filing requirements.
As stated in the advisory, the Employee Retirement Income Security Act of 1974 (ERISA) holds plan administrators responsible for ensuring that plan financial statements are properly audited in accordance with generally accepted auditing standards (GAAS).
You should be aware that hiring an auditor is considered a fiduciary function. As such, plan administrators should use the same care and prudence in hiring an auditor that they use when hiring any individual or entity that provides services to the plan.
The advisory lists four important factors for hiring a quality auditor: experience and professional development, identifying quality audit firms, independence, and licensing.
Experience and Professional Development
There are unique areas in employee benefit plans that only a qualified auditor who has the appropriate experience can identify and properly audit. Most of the common employee benefit plan audit deficiencies are auditors not performing enough tests in the following areas:
- Valuation of investments
- Timeliness of contributions
- Benefit payments to participants
- Transactions prohibited by ERISA
Identifying Quality Audit Firms
Firms that are members of the EBPAQC show that they are committed to providing quality employee benefit plan audits by adhering to higher audit quality standards and higher standards of training.
ERISA requires that the audit firm who prepares the audit opinion, report, and supplemental schedules be independent to the plan and the plan sponsor.
Federal law requires that an auditor engaged for an employee benefit plan audit be licensed or certified as a public accountant by a state regulatory authority.
The plan advisory also has a specific section that walks the plan administrator through the request for proposal process. It lists key items that you, as a plan administrator, should provide to potential employee benefit plan auditors, what types of information they should submit to you, and items you should consider when making a decision to engage a new plan auditor.
Employee Benefits Consulting
Trust Meaden & Moore to remove the worry and fiduciary risk from managing your employee benefit plan. If you have any questions regarding the important information included in the latest EBPAQC plan advisory, please contact us.