Commentary: The United States Department of Labors Employee Benefits Security Administration recently published a report on the quality of benefit plan audits performed by certified public accountants. The report, Assessing the Quality of Employee Benefit Plan Audits, shows a need for improvement in these audits, with 39%of audits showing one or more major deficiencies.
When mistakes are made on these audits, plan administrators can experience significant hardships, including rejections of Form 5500 filings, which can result in fines of up to $1,000 per day. These rejections have put $635 billion in assets and 22.5 million plan participants and beneficiaries at risk. Organizations considering a CPA firm to conduct employee benefit plan audits must make a number of considerations to ensure the firm employs the necessary safeguards to accurately and effectively complete these audits.
In order to ensure employee benefit plan audits are carried out efficiently and accurately, it is important to select a firm that employs a rigorous internal training program. New professionals should be required to complete employee benefit plan training, as should any team member involved with benefit plan audits. As employees continue to develop their expertise, it is vital for firms to offer access to educational resources such as seminars and subscriptions to national sources that constantly improve on firm practices as the industry evolves.
Beyond this internal training process, look for firms that are members of the American Institute of CPAs. AICPA offers employee benefit plan training courses that adhere to high ethical standards. Professionals who attend these courses are prepared and up-to-date with the most recent industry best practices and regulations. Working with educated and well-prepared CPAs helps companies avoid ethics violations and the pitfalls of deficient employee benefit plan filings.
Another safeguard to consider when approaching an employee benefit plan audit is your CPA firms audit review process. Many firms look only to their own employees for review and finalization of employee benefit plan audits; however, there are a number of third-party resources available that can help ensure the accuracy of audits and avoid costly mistakes.
In the wake of the Department of Labors recent report, taking the time to review the above considerations with your firm can play a great role in protecting your organization against deficiencies in these audits.
George Johnson is founder and managing director of George Johnson & Company, headquartered in Detroit with an office in Chicago. He has more than two decades of experience in employee benefit plan audits for major corporations and nonprofit organizations. George Johnson & Company is an independent member of the BDO Alliance USA.
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