This posting comes in from a different perspective - that of the benefit plan auditor. Since the reporting season for the calendar 2005 plan year is pretty much over, I thought it might be valuable to go over some of the problems that cropped up this year on such audits. After nearly 30 years of doing these audits, one would think that the audit requirement would be pretty well understood by now and the season would flow very smoothly. I shouldn’t be saying that the season is “pretty much over.” It should be just plain over.
Such was not the case this year. At an AICPA committee meeting last week, practice leaders from some of the nation’s largest CPA firms agreed that there were more Forms 5500 filed without audit reports this year than any year that they could recall. Surprisingly, in early October 2006, all were receiving requests for proposals for calendar 2005 or earlier plan audits.
What is up with this?
First, the plan audit process is a lot more complicated than it used to be and over the next several years, plan sponsors are going to find it even more complex. Today the complexities arise from paperless systems, HIPAA and other privacy considerations, mergers and acquisition activity, service providers' desire to protect what they see as their proprietary interests and changing investment arrangements. This has resulted in many audit firms leaving the business of doing plan audits or, at least, culling their client lists. That means that many plans are changing auditors unexpectedly and, often, late in the game. Hence, we have the problem with too many incomplete filings this year.
But that is not the only reason. There were simply a lot of problems this year. I wanted to take advantage of this space to give the readers some free advice on working with their benefit plan auditor.
I recognize that when you look at many of the problem areas for the year, it appears that the auditor has an adversarial relationship with the sponsor. That is not intentional. It is grounded in the fact that ERISA requires that the audit be conducted for the benefit of the participants and beneficiaries. The auditor should simply be living up to their arrangement letter.
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