For most companies, the benefit plan audit is a requirement that needs to be addressed to satisfy regulators. A benefit plan audit is often coupled with the company’s financial statement audit to save on fees and make it easier with a single provider managing the process. While this may seem like a logical approach, there can be a significant down side. In the Department of Labor (DOL) study, Assessing the Quality of Employee Benefit Plan Audits, several serious and significant issues were identified based on an assessment of audits on benefit plans.
The most common factor between firms with substandard and acceptable audit reports was experience. It was noted that firms with limited experience in benefit plan audits had committed one or more significant errors in the execution of the audit. This has raised concern among management teams about the quality of their plan audits. Beyond fees or audit issues, there are several key signs that it may be time to change your plan auditor. To help clients, prospects and others understand these signs, Selden Fox has provided a summary below.
Signs It’s Time to Change Plan Auditors
- Missed Deadlines – Many companies are finding out that plan auditors often miss deadlines. In fact, for many firms it is frequent practice to place every client on extension. This gives the audit firm additional time (from July 31 to October 15) to complete the audit fieldwork and prepare the audit report. The problem with this practice is that it can be a significant inconvenience for the company. When your plan auditor regularly makes a habit of missing deadlines, it’s important to understand that this could be a sign of bigger issues beneath the surface. Pay careful attention to how the audit engagement is managed to determine if this is an issue with your current auditor.
- Inconsistent Staff – It’s commonplace at some firms to use new or inexperienced audit staff to work on plan audits. This typically happens because benefit plan audits are completed in the summer months when auditors are less busy. This provides an excellent opportunity for newer staff to get valuable fieldwork experience. When your plan auditor leverages this approach, it’s a sign they may not have a specialty group focused on plan audits. This can cause a problem because benefit plan audit regulations are becoming more specific, requiring the attention of specialized professionals to properly execute the audit.
- Limited Amount of Plan Audit Clients – The DOL study identified a connection between firms that perform a small number of audits and quality concerns. According to the report, “There is a clear link between the number of employee benefit plan audits performed by a CPA and the quality of the audit work performed.” When an accounting firm only handles a limited number of benefit plan audits it is a strong indication that they may lack the expertise (and process efficiencies) of a more experienced plan auditor. For this reason, it’s important to learn how many plan audits your provider conducts. Whatever the answer, carefully consider how this impacts the level of service you receive.
- Lack of Professional Membership – Any plan auditor who doesn’t have a corresponding professional membership should be viewed with an eye of concern. The gold standard organization is the American Institute of Certified Public Accountants (AICPA) Employee Benefit Plan Audit Quality Control Center (EBPAQC). This organization provides updates on key issues, regulations, and legislation surrounding benefit plans. CPA firms pay fees to belong to this organization and are subject to stricter testing standards than nonmember firms. Determine if your plan auditor is a member; if not it’s certainly a sign that a change may be in order.
If your retirement plan audit process has not gone as you anticipated because of scheduling, staffing, or other issues, it may be time to consider changing your auditor. The information provided above is only a glimpse into the many signs that it’s time to change plan auditors. If you have questions about your plan audit experience or need assistance with your retirement plan audit, Selden Fox can help. For additional information please call us at 630.954.1400, or click here to contact us. We look forward to serving you soon.
Chris Van Sickle, CPA
Chris Van Sickle is a Vice President in the firm’s audit group. His public accounting practice actively includes auditing, accounting services, and tax preparation for clients across a spectrum of industries. He provides services for privately held entities, investment partnerships, employee benefit plans, and financial institutions.