How to Choose an Employee Benefit Plan Audit Firm
Employee benefit plan audits are designed to protect the financial integrity and assets contained in your plan and provide valuable information to plan administrators—not to mention the legal and financial advantages.
But if your organization needs an employee benefit plan audit, it’s critical to carefully select your employee benefit plan audit firm to ensure maximum value for your company.
So, how do you choose the right employee benefit plan audit firm for your company?
Choosing an Employee Benefit Plan Audit Firm: Three Things to Consider
Choosing an employee benefit plan audit firm is a 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 many audits reviewed by the DOL feature major deficiencies. These areas of concern can result in significant fines and penalties for plan administrators.
A major contributor to the high rate of employee benefit plan audit deficiencies discovered by the DOL is the lack of training and experience of employee benefit plan auditors.
There are unique aspects of an audit involving an employee benefit plan that require specific knowledge and experience to perform required duties comprehensively and effectively.
It’s imperative to ensure that your employee benefit plan audit firm 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 employee benefit plan audit firm 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 employee benefit plan must be licensed as a certified 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 employee benefit plan audit firm, inquire whether their work on employee benefit plans has undergone the peer review process, and examine the results from such work.
Familiarity With Required Procedures
Your employee benefit plan audit firm 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 to effectively perform the required risk-assessment examinations.
When performing and designing the auditing procedures, your employee benefit plan audit firm needs to consider the relevant plan provisions impacting the risk of any material misstatement of account balances, disclosures and transactions.
An employee benefit plan audit firm also 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 employee benefit plan audit firm is whether transactions that are prohibited for the employee benefit plan 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 employee benefit plan.
The Department of Labor’s Guidance on Employee Benefit Plan Audit Firm Selection
The DOL also provides guidance for plan administrators when selecting an employee benefit plan audit firm, as well as reviewing the audit report and audit process.
Specifically, before hiring an employee benefit plan audit firm, the DOL recommends that plan administrators consider the auditor qualifications concerning:
- Your type of employee benefit plan
- Their auditing experience with similar employee benefit plans
- References from the auditor
- 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.
Moving Forward With Employee Benefit Plan Audit Firm Selection
When choosing the right employee benefit plan audit firm, 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; this will help ensure that the employee benefit plan audit services will save you time and money in the long run.
Warren Averett is an employee benefit plan audit firm committed to providing quality employee benefit plan audit engagements. We conduct more than 250 employee benefit plan audits annually, which ranks in the top 1% of accounting firms. Our audits handle employee benefits 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 employee benefit plan audit firm 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.
This article was originally published on February 24. 2021 and most recently updated on May 25, 2023.