Federal law requires most employee benefit plans with more than 100 active participants to have an independent audit of the plan financial statements and to include the audited financial statements with the annual form 5500 filed with the Department of Labor (DOL).  For calendar yearend plans on extension, the filing deadline is October 15.  Significant penalties can be levied against the plan administrators and sponsors by the DOL for deficient and or late filings. One of the most important decisions a plan administrator makes as part of their fiduciary duties is selecting a qualified, independent auditor to perform the plan audit. When making this decision, what really matters?

Three Factors to Consider When Choosing a Benefit Plan Auditor

1. Plan auditor qualifications

Federal law requires an employee benefit plan auditor responsible for signing the audit report to be licensed or certified as a public accountant by a State regulatory authority.  In addition, the auditor must be independent and not have any financial interests in the plan or the plan sponsor.

2. Auditor experience and firm peer review results

One of the most common reasons for deficient audit reports is the failure of the auditor to perform tests in areas unique to benefit plans. The more training and experience an auditor has with employee benefit plan audits, the more familiar the auditor will be with specialized benefit plan auditing standards.  In addition, firms performing benefit plan audits should have the audits subjected to their triannual peer review and annual internal inspection process.  Peer review is an external inspection process performed by an external independent auditor.  Peer review examines the audit firm’s adherence to their quality controls standards including “tone at the top”, hiring process and compliance with regulations to include; continuing professional education, compliance with auditing standards and the application of generally accepted accounting principles. 

3. Association memberships

The Employee Benefit Plan Audit Quality Center (EBPAQC) is a voluntary membership center of the American Institute of Certified Public Accountants (AICPA) to help audit firms meet the challenges of performing audits of employee benefit plans.  Being a member firm requires the audit firm to comply with a higher set of standards and practices specific to plan audits than non-member firms. In addition, the AICPA and EBPAQC requires its members to have their audit practice reviewed by internal and external qualified auditors.

In closing, employee benefit plan audits have increasingly become the subject of examination by the DOL and IRS, so it is imperative to select a qualified employee benefit plan auditor.  For a full list of EBPAQC member firms, click here.

Some key questions to ask when considering a benefit plan auditor are:  Are you a CPA?  How many employee benefit plan audits do you perform each year?  Are the auditors in your firm performing benefit plan audits required to have specialized employee benefit plan audit training?  Are your benefit plan audits subjected to peer review?  What were the results of your most recent peer review?  Are you a member firm of the AICPA’s Employee Benefit Plan Audit Quality Center?

Choosing a benefit plan auditor can be overwhelming. If you don’t know where to start, contact Dan Harris, CPA, at danh@reynoldsrowella.com or 203-972-5191 for more information.

Reynolds + Rowella is a regional accounting firm known for a team approach to financial problem solving. As Certified Public Accountants, our partners foster a personal touch with our clients. As members of DFK International/USA, an association of accountants and advisors, our professional network is international, yet many of our clients have known us for years through the local communities we serve.
Our mission is to operate as a financial services firm of outstanding quality. Our efforts are directed at serving our clients in the most efficient and responsive manner possible, delivering services that exceed the expectations of those we serve. The firm has offices at 90 Grove St., Ridgefield, Conn., and 51 Locust Ave., New Canaan, Conn. For more information, give us a call at 203.438.0161 or email us.