Plan Audit Deficiencies | DOL Audit Reviews | 401k Auditor KY

Dept. of Labor Study Cautions Employee Benefit Plan Sponsors on Auditor Selection

Published on by Joe Conover in Benefit Plan Audits

Dept. of Labor Study Cautions Employee Benefit Plan Sponsors on Auditor Selection

In light of the U.S. Department of Labor’s (DOL’s) recently issued Audit Quality Study, Barnes Dennig’s commitment to audit quality and insight beyond the numbers is more important than ever. Barnes Dennig has been a member of the AICPA’s Employee Benefit Plan Audit Quality Center since its inception over ten years ago, which helps to enable our audit team members to maintain high quality audit and technical expertise, which is and has been a critical factor with providing our employee benefit plan clients high quality employee benefit plan services they can count on to comply with DOL requirements.

The DOL has conducted a nationwide study focused on the quality of employee benefit plan audit work performed by certified public accounting firms.  The study took a sample of 400 retirement plan audits by 232 CPA firms for the plan years covered by the 2011 Form 5500 annual filing (plan years beginning in 2011).  To put this in perspective, there are approximately 80,000 benefit plan filings per year with the DOL.

The samples were divided into six strata based on the size of the firm’s employee benefit plan audit practice:

Number of Plans Deficient Audits 
 1-2  75.8%
 3-5  68.4%
 6-24  67.4%
 25-99  41.5%
 100-749  12.0%
 750+  12.0%



The results reported a direct correlation between the size of the firm’s practice in this field and what the DOL deemed to be deficient audit work. The report indicates that more than 75% of plan audits were deficient in the 1-2 plan strata and that 95% of CPA firms audit fewer than 25 plans, whereas firms with larger numbers of benefit plan audits are shown to have fewer instances of multiple deficiencies. Further, the DOL did acknowledge that firms that are members of the AICPA’s Employee Benefit Plan Audit Quality Center tended to have fewer instances of multiple deficiencies than did non-members.  View the DOL’s complete report on Assessing the Quality of Employee Benefit Plan Audits.


The DOL Audit Quality Study showed that practitioners who only audit a few benefit plans do not have enough experience or knowledge to perform audits that comply with professional standards, which ultimately could subject plan sponsors to large penalties.

One root cause identified by the DOL is the “limited scope audit” which DOL believes allows auditors to perform lower quality audit work because they are not expressing an opinion on the financial statements.  The American Institute of CPAs (AICPA) has long been supportive of the elimination of this option, which was provided by the Employee Retirement Income Security Act of 1974 (ERISA), in order to eliminate confusion in the industry.


Federal law (ERISA) requires employee benefit plans with 100 or more participants (and in some cases 120 or more participants) to have an audit as part of their obligation to file an annual return/report (Form 5500 series).  Selection of a quality auditor is a key responsibility of the plan administrator for any employee benefit plan.  Having a quality auditor engaged not only helps ensure compliance with regulatory requirements, but can also help plan management identify that the proper internal controls are in place to help minimize errors in plan operations.

The DOL is proposing significant regulatory changes in this field, and they have proposed many of these changes in the past.  However, the DOL has no regulatory authority and it is up to Congress to determine what, if anything, to change, and Congress determines its regulatory agenda.  The process for regulatory change is a long one, so we don’t expect to see any major transformations in the immediate future.

If you know of someone using a small firm for these audits and would like to consult with our experts to help ensure you are getting quality audit work performed that would pass DOL scrutiny, please contact a member of the Barnes Dennig Employee Benefit Plan Team today.



More Insights

Apply Now