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.
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.
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.
Firms, Low Fees
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.
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.”
also found that auditing fees that are extremely low are a warning signal that
an audit may be deficient, Hauser said.
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
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.
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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