The Department of Labor’s (DOL) Office of Inspector General/Office of Audit recently completed a study and released their report on the ERISA’s plan audit process. ERISA requires that large employee benefit plans use an independent qualified certified public accountant to audit the plan’s financial statements in accordance with generally accepted auditing standards. The DOL is responsible to ensure that these audits meet ERISA requirements. The DOL has devoted significant efforts towards improving the oversight and quality of the ERISA plan audit process.

These efforts have included working with the AICPA to (1) establish an audit quality center to provide guidance and education, (2) target methods to identify and correct substandard plan audits and (3) provide training and outreach for plan auditors. Despite these efforts, the protections and assurances have decreased over time for plan participants and their beneficiaries. The increased use of limited scope audits by plan administrators has led to a significant growth in the asset value of plans under these limited scope audits. In fact, a recent article in Forbes magazine stated “the percentage of plans electing limited scope audits has grown from about 46% in 1987 to approximately 70% in 2010. The reported value of assets excluded from plan audits has similarly grown from about $520 billion in 1989 to $3.3 trillion in 2010.”

The DOL’s Employee Benefits Security Administration (EBSA) will continue to seek to repeal the limited scope audit exemption and obtain authority over plan auditors. In the interim, the EBSA will attempt to (1) use the existing authority to strengthen the audit regulations over limited scope audits, (2) seek better enforcement over the accountants auditing the plans, (3) improve procedures in audit quality reviews and, (4) reassess audit quality.

In the meantime, what can you as a plan trustee do to ensure the quality of the audit of your employee benefit plan? You should be looking for a CPA firm for your employee benefit plan audit that has three crucial components, (1) Commitment to Excellence, (2) Proven Track Record and, (3) Experience. You can also read my previous article from November 1, 2011 titled selection of the proper auditor for your employee benefit plan that discussed each of these crucial components in depth.

The choice of your plan auditor is in your hands. You want your auditor to have each of these components to give you the confidence that you and your plan participants deserve. Make sure that you put your plan in the hands of experts to give you peace of mind. Our blog why your retirement plan should be audited by a an experienced CPA, goes into this in detail.

For more information or questions regarding your Employee Benefit Plan Audit, contact a member of our Retirement Plan Services Group at 401-274-2001.