Not all CPA firms are qualified to carry out employee benefit plan audits. Here’s how to ensure you choose a firm that will work for you.
First: Who needs to have a benefit plan audit?
Employee Benefit Plan Audit Requirements
If you have more than 100 employees who participate in your organization’s benefit plans, each year, in conjunction with Form 5500 filing, the Department of Labor (DOL) requires that you undergo an employee benefit plan audit.
Your audit must be in accordance with GAAS (generally accepted auditing standards). These professional standards can be applied by a certified public accounting firm with experience carrying out employee benefit plan (EBP) audits.
Finding the Right CPA Firm for Your EBP Audit
While most organizations in the United States comply with the requirement to have their employee benefit plans audited, statistics from the Department of Labor have shown that nearly one-third of annual audits are deficient. This is just another reason why it’s so critical to find a qualified CPA firm to conduct your audit. When deficiencies are found, plan sponsors risk serious penalties and put their organizations on the line.
As you move toward hiring a certified public accounting firm to conduct your EBP audit, you should keep some specific considerations in mind. The following is a list of the specific standards that the Department of Labor has identified as contributing factors to the success of employee benefit plan audits:
- The extent of audits the CPA firm has carried out
- How much experience the CPA firm has conducting EBP audits, specifically
- How large the certified public accounting firm is and what experience they have conducted audits for large organizations
Questions to Ask Potential CPA Firms
“What professional organizations are you a part of?”
Your CPA firm should be a member of the AICPA Employee Benefit Plan Audit Quality Center (EBAQC). Look for other established relationships with professional organizations, consultants, actuaries, attorneys, and national and local community organizations.
“How big is your auditing firm?”
Unfortunately, the smaller the auditing firm, the more likely it is to result in deficiencies when work is reviewed by the Department of Labor. Larger CPA firms are able to have auditors who are devoted specifically to employee benefit work, which benefits your organization in the end and ensures your federal compliance.
“How much employee benefits work do you do on a regular basis?”
What type of experience does the CPA firm have with employee benefits work? Specifically, what percentage of their practice is devoted to employee benefit audits? Hire a firm that devotes a significant amount of their business to this work.
Furthermore, keep in mind that there are unique tests that must be carried out for employee benefit plan audits. These include party-in-interest/prohibited transactions, plan obligations, participant data, benefit payments, and participant loans.
“How current are your auditors with training and changes in regulations and federal law?”
Federal regulations and laws are always changing, which requires a continual renewal of technical competency and training. Be sure to ask your CPA firm how they train new employees and update training for current auditors. Ensure that they mention the attention to changes in legislature and other shifts in the employee benefits industry.
Selecting a qualified CPA firm to conduct your organization’s employee benefit plan audit comes with a large amount of responsibility. Be sure to ask the questions above as you do your research and make your ultimate decision.