June 4, 2015

DOL Issues Report on Quality of Employee Benefit Plan Financial Audits

On May 28, 2015, the Department of Labor (DOL) released the results of its most recent study on the quality of employee benefit plan financial audits. The purpose of the study was to determine if audit quality had improved since the last study was conducted in 2004, and the answer was that the quality had declined. Among the study’s findings were that the number of plans with deficiencies had increased as the number of plans with limited scope audits had increased and that the number of deficiencies identified in an audit was higher in audits by firms that did small numbers of employee benefit plan audits. The study attributes this latter finding to “audit areas that are unique to employee benefit plans such as contributions, benefit payments, participant data and party-in-interest prohibited transactions.”  

The study makes a number of recommendations on how to improve audit quality, including more targeted examinations, additional work with accounting professional associations and seeking legislation that would authorize the DOL to establish qualification standards for benefit plan auditors and audits, penalize auditors directly and limit the availability of limited-scope audits.  

Under ERISA, most plans with over 100 participants must be audited annually by an independent CPA. The study, entitled, “Assessing the Quality of Employee Benefit Plan Audits,” was based on a sample of financial audits filed with the 2011 Forms 5500 of 400 plans, and is available at http://www.dol.gov/ebsa/pdf/2014AuditReport.pdf.

If you have any questions about the report, please contact your Sibson consultant or send us a note.

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