This article is an excerpt from Dopkins Employee Benefits Newsletter.
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For more information, please contact John Matte at jmatte@dopkins.com.

A recent Department of Labor study reinforces that the choice of auditor for your benefit plan is an important fiduciary responsibility and should not be taken lightly. The audit can go beyond affirming your plan compliance — it can also help your organization identify operational issues to correct.

In 2023, the Office of the Chief Accountant (OCA) of the Employee Benefits Security Administration of the Department of Labor (DOL) completed its latest Audit Quality Study. This was the fifth Audit Quality Study performed by the DOL, and the first since 2015. The OCA selected 307 plan audits covering the 2020 plan year and reviewed the auditors’ workpapers. The OCA evaluated these workpapers against the American Institute of Certified Public Accountants’ Audit and Accounting Guide, Audits of Employee Benefit Plans. Different from the 2015 study, the 2023 study utilized “plan” as the sampling unit, rather than “accounting firm.” Below are some highlights from the study:

• In its executive summary of the study, the OCA notes, “We also found that there continues to be a clear link between the number of employee benefit audits a CPA performed and the quality of the audit work.” The below table was included as an exhibit to the study.

• Overall, 30% of audits showed a deficiency. This is a decrease from the 2015 study, which had an aggregate deficiency rate of 39%.
• The number of CPA firms performing audits continues to decrease.
• Audits performed by Employee Benefit Plan Audit Quality Center members had a lower deficiency rate.
• In its report, the OCA highlighted the audit areas where their findings were most common – participant data, contributions, benefit payments and internal controls.
• More specifically, the appendices to the report highlighted more detailed testing areas where auditors failed to meet the standards:
  • Recalculation of eligible compensation
  • Eligibility to receive a benefit payment
  • Testing of account allocations
  • Calculating and reporting delinquent contributions
  • Insufficient documentation of control environment
  • Evaluation of specialists
  • Inappropriate reliance on or evaluation of SOC reports

TAKEAWAY

Early in its report, the OCA summarizes the study very well, stating “While the trend in audit quality has improved, too many employee benefit plan audits are deficient.” The study stresses the importance of selecting a good and qualified auditor. It is the best result for plan participants, but also the best result from a compliance perspective.

About the Author

John F. Matte Jr. CPA

John serves as a leader in the Firm’s employee benefit plan audit practice, and concentrates his practice on audits on behalf of for-profit entities from a wide cross-section of industries. He also has significant experience consulting clients with respect to documentation and testing of internal controls, particularly entities subject to Sarbanes Oxley compliance.