On November 13, 2015, the Chief Accountant from the U.S. Department of Labor (DOL) e-mailed retirement plan sponsors stressing the critical importance of selecting a qualified and experienced CPA to perform the employee benefit plan’s audit. Referencing a 2015 DOL report that found 39% of retirement plan audits contained major deficiencies, the Chief Accountant warned that such deficiencies can lead to costly consequences, such as civil penalties and the potential loss of plan assets, to plan administrators and sponsors. In an effort to minimize this risk, the e-mail suggested selecting a qualified and experience CPA firm while considering the following guidelines:
- The number of employee benefit plans the CPA audits each year, including the types of plans;
- The extent of specific annual training the CPA received in auditing plans;
- The status of the CPA’s license with the applicable state board of accountancy;
- Whether the CPA has been the subject of any prior DOL findings or referrals, or has been referred to a state board of accountancy or the American Institute of CPA’s for investigation; and
- Whether or not your CPA’s employee benefit plan audit work has recently been reviewed by another CPA (this is called a “Peer Review”) and, if so whether such review resulted in negative findings.
Employee benefit plan audits are unique audits, requiring specialized training and expertise, and differ from other financial statement audits. The aforementioned 2015 DOL Report noted “a clear link between the number of employee benefit plan audits performed by a CPA and the quality of the audit work performed.” Barnes Dennig is one of the top 100 CPA firms in the nation in terms of the number of plans audited annually. We have 85 employee benefit plan audit clients and more than 120 plans, ranging in size from 100 to 3,000 participants and $2 million to $350 million in assets. Barnes Dennig’s employees regularly receive extensive training for these audits and provide additional services, such as an annual plan audit seminar that provides information to retirement plan sponsors concerning recent developments as it relates to employee benefit plans. Barnes Dennig is a member of the American Institute of Certified Public Account’s Employee Benefit Plan Audit Quality Center, a trait that the DOL noted tends “to produce audits that have fewer audit deficiencies.” Finally, we are subject to a “Peer Review” and to date, have had no negative findings as a result.
While these qualifications do not provide absolute assurance against significant penalties from a rejected DOL filing due to a deficient audit, Barnes Dennig will serve as a valuable advisor as it relates to employee benefit plan operations and best practices, as well as ensuring the financial statements are complete and accurate.
As legislation around employee benefit plans changes and evolves, it’s essential to maintain a proactive and responsive approach to your strategy. Now more than ever, it’s important to review the Department of Labor guide for selecting an auditor to ensure that you are ahead of the curve. For additional information on these guidelines, or any other matters that may affect your business, contact us at 513-241-8313, or click here to have a representative reach out to you. We look forward to speaking with you soon!