Plan Auditors: Do Your Homework – Not All are Created Equal

Plan Auditors

Plan Auditors: Do Your Homework – Not All are Created Equal. The Department of Labor wants to make sure plan sponsors are doing proper due diligence when selecting a retirement plan auditor. This was the subject of an email the DOL sent out in December 2016, wherein it also encouraged sponsors to read their publication: “Selecting an Auditor for Your Employee Benefit Plan.”

Subpar audits can put plan assets at risk, and potentially result in penalties for a plan sponsor. So it’s kind of a big deal that you make an informed choice when choosing an auditor for your plan. Not just any old CPA firm will do.

Fiduciary solutions firm Fiduciary Plan Governance (FPG) recently penned a series of blog posts on the subject. In its second post, “Reducing the Chances of Auditor-Related Problems,” FPG outlines the DOL criteria for determining whether a CPA firm is well-qualified to perform your plan audit:

“• The number of employee benefit plans the CPA audits each year, including the types
of plans;
• The extent of specific annual training the CPA received in auditing plans;
• The status of the CPA’s license with the applicable state board of accountancy;
• Whether the CPA has been the subject of any prior DOL findings or referrals or has
been referred to a state board of accountancy or the American Institute of CPA’s for
investigation;
• Whether or not your CPA’s employee benefit plan audit work has recently been
reviewed by another CPA (“Peer Reviewed”) and, if so, whether such review resulted
in negative findings.”

It’s obvious from the above list what the DOL expects, and what they will be looking for if they decide to scrutinize your plan. In FPG’s prescient words: “Forewarned is forearmed.”

FPG also advises sponsors not to simply look at the number of audits a firm has performed. It’s not as telling of their capabilities — or their quality — as you might think. Instead, look for potential “problem” areas, such as lack of experience, the absence of peer reviews, DOL findings of “unacceptable” filings, etc.

The best way to vet a potential auditor is to ask them a series of questions, and request they confirm their responses in writing. FPG suggests the following:

“• Whether plan assets have been fairly valued?
• Whether plan obligations are properly stated and described?
• Whether contributions are transmitted in a timely manner?
• Whether benefit payments are being made in accordance with the plan’s documents
and terms?
• Whether participant balances/benefits, as applicable, are correctly stated?
• Whether there are any potential disqualification issues?
• Whether “prohibited transactions” have been identified?”

Still, even if the auditor’s answers to these questions seem to be on the up and up, you might consider alternative candidates, just to be sure. Sending out requests for proposal (RFP) to different audit firms with employee benefit plan expertise is the best way to get this done.

Robyn Kurdek

Robyn Kurdek

Freelance writer with nearly 2 decades of financial industry experience, with niche expertise in the defined contribution (DC) industry. I also have defined benefit (DB) plan knowledge. I write all types of content for retirement plan participants, sponsors and advisors, including web copy, newsletters, white papers, fact sheets, blog posts, financial wellness articles, and more. "I speak DC."
Robyn Kurdek
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