No word yet on whether the U.S. Department of Labor under the new administration will end its recent focus on improving the quality of employee benefit plan audits.
The department launched a major effort to improve the quality of the benefit plan audits after a study showed almost 40 percent had major deficiencies. The Labor Department estimates these deficiencies put at risk approximately $653 billion in the retirement plans of 22.5 million employees and beneficiaries.
More than 7,300 licensed certified public accountants audit more than 81,000 employee benefit plans a year. Labor Department research finds a clear link between the number of audits an accounting firm does and audit quality.
The fewer audits routinely handled by a firm, the more likely there are to be significant deficiencies. Firms that performed two audits or less had a 76 percent deficiency rate in complying with generally accepted auditing standards, and firms that performed between three and five audits had a 68 percent deficiency rate.
Training helps, according to the Labor Department. Its study found that firms in the American Institute of Certified Public Accountants’ voluntary Employee Benefit Plan Audit Quality Center had significantly fewer audit deficiencies on average. The audit quality center gives its members access to news, technical assistance and continuing education.
The Labor Department has been working with the American Institute of Certified Public Accountants and the National Association of State Boards of Accountancy to improve the investigation and sanctioning process of accounting firms whose audits have not met the department’s muster.
Whether the new administration pushes for a change in the Employee Retirement Income Security Act remains to be seen. The prudent course for employers will be to make certain their CPAs have experience in benefit plan audits and belong to the institute’s audit quality center.
— Robert J. Behr, CPA, senior manager, McClintock & Associates, firstname.lastname@example.org
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