Since many ERISA plans are in the process of preparing their audited financials for the 2009 Form 5500, this is a good time to to reflect on the nature and responsibilities that the plan administrator has in connection with the audit process. (As chair of the Audit Subcommittee for the committee that is the plan sponsor and plan administrator of the Goodyear Retiree VEBA, I had to think through these issues for our plan.)
Section 103(a)(3)(A) requires the plan administrator to engage an independent qualified public accountant “on behalf of all plan participants” to examine the plan’s financial statements and determine whether they are presented fairly in conformity with generally accepted accounting principles. The auditor is retained by the plan administrator, a fiduciary, and therefore the choice of the plan auditor is clearly a a fiduciary decision.
Over the years, we have all had the experience of dealing with inexperienced junior personnel who'd never done an ERISA plan audit and didn't really understand the difference between a plan audit and a corporate audit.
Thankfully, those days have changed. The AICPA, at the urging of the DOL's Office of Chief Accountant, has an established the Employee Benefit Plan Audit Quality Center, which provides a number of useful tools for plan administrators to use when choosing an auditor. Start with the primer on Audit Quality and Auditor Selection that includes links to DOL guidance on choosing an ERISA plan auditor.
When we were first choosing our auditor for the VEBA, I downloaded the AICPA RFP and Auditor Evaluation Process Checklist for Plan Sponsors and easily adapted the sample RFP to fit our plan's unique needs.
But the most valuable resource is the list of CPA firms that are members of the Employee Benefit Plan Audit Quality Center. To be a member of the Center, a firm must:
Establish a program to ensure that all ERISA employee benefit plan audit engagement personnel possess current knowledge, appropriate to their level of involvement in the engagement, of applicable professional standards, rules and regulations for ERISA employee benefit plan audits
Designate an audit partner to have firm-wide responsibility for the quality of the firm's ERISA employee benefit plan audit practice, which gives you a person within the firm to contact about your potential ERISA audit.
Establish policies and procedures specific to the firm's ERISA employee benefit plan audit practice to comply with the applicable professional standards and Center membership requirements.
Establish annual internal inspection procedures that include a review of the firm's ERISA employee benefit plan audit practice by individuals possessing current experience and knowledge of the accounting and auditing practices specific to ERISA employee benefit plan audits. The internal inspection reports specific to the ERISA engagements are then made available to the firm's peer reviewer, from another firm that is a member of the Center. Each member firm must have its ERISA employee benefit plan audits peer review reviewed by an experienced auditor from another Center member firm and make information about its most recently accepted peer review publicly available.
So when you choose a firm that is a member of the Employee Benefit Plan Audit Quality Center, you know you are choosing among audit firms that have experience with ERISA audits, that have procedures in place for conducting an ERISA audit, that have been peer reviewed on their ERISA audits, and that require their audit personnel to keep current on ERISA issues that will impact a plan audit.
DOL also has a very useful publication on "Selecting An Auditor For Your Employee Benefit Plan" that not only gives advice on selecting the plan auditor but also explains what the plan administrator should look for when reviewing the audit and includes questions to ask the auditor.
-- Nell Hennessy
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