Employee benefit plan audit services are designed to protect the financial integrity and assets contained in your plan and provide valuable information to plan administrators—not to mention legal and financial advantages from an EBP audit.
But if your organization needs an EBP audit, it’s critical to carefully select your auditor to ensure maximum value for your company through employee benefit plan audit services.
So, how do you choose the right auditor for your company?
Choosing an EBP Auditor: Things to Consider
Choosing a provider for employee benefit plan audit services is a very critical decision. Some of the most important considerations in selecting your auditor include competence, adherence to standards, familiarity with required procedures and DOL guidance.
Let’s take a closer look at each.
Establishing Competence and Expertise
The unfortunate reality is that nearly 40% of audits reviewed by the DOL featured major deficiencies in ERISA audits. These areas of concern can result in significant fines and penalties for plan administrators.
A major contributor to the high rate of EBP audit deficiencies discovered by the DOL is the lack of training and experience of EBP auditors. There are unique aspects of an audit involving an EBP that require specific knowledge and experience to perform required duties comprehensively and effectively.
It’s imperative to ensure that your auditor is capable of performing these duties effectively. Generally, auditors with more experience pose less risk of performing their audit responsibilities ineffectively, including meeting employee benefit plan audit deadlines.
Another option to ensure that an auditor is able to conduct the audit effectively is to seek someone who is a member of the Employee Benefit Plan Audit Quality Center. This organization aims to provide quality audit services to clients by adhering to established auditing standards.
Certification and Adherence to Standards
Any auditor of an EBP must be certified or licensed as a public accountant by the state regulatory authority.
It varies from state to state, but some jurisdictions require that audits must be independently reviewed. Licensed auditors must inspect the audit and the audit process to make sure that standards are upheld, a system known as “peer review.”
If you want a basis for evaluating a potential auditor, inquire whether their work on EBPs has undergone the peer review process and examine the results from such work.
Familiarity with Required Procedures
Your auditor must be familiar with up-to-date plan documents that relate to the period being audited. Any amendments to the plan documents need to be considered in order to effectively perform the required risk-assessment examinations.
When performing and designing the auditing procedures, your auditor needs to consider the relevant plan provisions impacting the risk of any material misstatement of account balances, disclosures and transactions.
An auditor needs to carefully consider audit assertions. These are the explicit or implicit representations and claims that are made by plan sponsor administrators who are responsible for preparing financial statements concerning the appropriateness of elements in financial disclosures and statements. Audit assertions also include the aspects of completeness, rights and obligations, existence, valuation and accuracy, as well as disclosures and presentation.
Another area that falls under the purview of your auditor is whether transactions that are prohibited for the EBP that have been identified by plan administrators or discovered in the auditing process are accurately reported in the supplemental schedules. Note that this is required even if the effects of nonexempt prohibited transactions are immaterial to the financial statements of the EBP.
The Department of Labor’s Guidance on Auditor Selection
The DOL provides guidance for plan administrators when selecting an EBP auditor as well as reviewing the audit report and audit process.
Specifically, before hiring an EBP auditor, the DOL recommends that plan administrators consider the auditor qualifications concerning:
- Your type of EBP;
- Their auditing experience with similar EBPs;
- References from the auditor; and
- Their licenses.
In addition, the DOL recommends that you consider the importance of an audit engagement letter, the scope of the audit, what steps occur at the end of the audit and suggests questions that the plan administrator should ask their auditor about their work.
Warren Averett Makes Auditor Selection Easy
When choosing the right provider for employee benefit plan audit services, it’s important to base your decision on all relevant factors.
It’s never a good idea to simply consider one factor, such as the lowest cost, when making your decision. Consider dutifully the expertise, experience, cost, ability to meet employee benefit plan audit deadlines and quality of your auditor, as this will help ensure that the employee benefit plan audit services will save you time and money in the long run.
At Warren Averett, we are committed to providing quality EBP audit engagements. We conduct more than 250 EBP audits annually, which ranks in the top 1% of accounting firms. Our audits handle EBPs that range from under $1 million to in excess of $12 billion in assets for both private and public companies.
The experts at Warren Averett take the guesswork out of EBP auditor selection. We are members of the AICPA Employee Benefit Plan Audit Quality Center and take pride in our stellar track record of having the DOL find zero deficiencies in our audits. Contact us today for more information.