DOL Survey Finds ‘Unacceptable' Rate Of Plan Audit Deficiencies, Official Says


More than a third of all employee benefit plan audits have deficiencies, a rate that is “unacceptable,” a Department of Labor official said at a conference of the American Institute of CPAs.

The role of the auditor is “fundamentally to make sure that benefits are going to be paid,” Timothy D. Hauser, deputy assistant secretary for program operations of the DOL's Employee Benefits Security Administration, said Dec. 4. “That's an extremely important obligation, and it's a serious problem when auditors fall short in meeting those standards,” he said.

The deficiency rate is also increasing, not abating, Hauser said. One of his frustrations is the number of plans with serious deficiencies. “The trend is going opposite the direction we'd like,” he said.

Section 103 of the Employee Retirement Income Security Act requires that plan audits be conducted pursuant to the standards established by the accounting and auditing profession in the pronouncements that define generally accepted accounting principles and generally accepted auditing standards.

Small Firms, Low Fees

About half of the survey sample was made up of smaller auditing firms, those that audit five or fewer plans per year, said Ian Dingwall, chief accountant in EBSA's Office of the Chief Accountant.

One of the surprises that the DOL found is that some of those smaller firms aren't licensed in the state in which they are practicing, Dingwall said.

And why?

Because the application forms the firms used to get licensed and pay their fee is incorrect, Dingwall said. “Incorrect would be a good word, right?” he said. “ ‘Lie' would be another word.”

The DOL also found that auditing fees that are extremely low are a warning signal that an audit may be deficient, Hauser said.

Although plan sponsors should comparison shop to make sure they are getting a good deal on an auditor's fees, they shouldn't focus on getting the lowest fees, Hauser said.

“I'll tell you that one of the red flags when we're looking at audits” is low fee levels, he said. Even some “quite large plans” have audits showing that the auditors charged very low fees, “which would suggest that nobody was taking the obligation terrifically seriously,” he said.

The AICPA issued a guide Dec. 3 on auditor selection that warned plans about the dangers of hiring unqualified auditors, saying that sponsors and administrators shouldn't be lured by low fee levels.

Excerpted from a story that ran in Pension & Benefits Daily (12/04/2014).

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