Attention plan fiduciaries…are you in the process of selecting an employee benefit plan auditor? The right audit firm should comply with a few professional standards. We dive in here.

First off—what are the duties of a fiduciary?

As fiduciary, you are required to discharge your duties solely in the interest of plan participants and beneficiaries and for the exclusive purpose of providing benefits for them and defraying reasonable plan administrative expenses. A fiduciary is personally liable to the plan for losses resulting from a breach of his or her fiduciary responsibility.

If an audit of the Company’s retirement plan is required by law, one of the duties of the fiduciary is to select the accounting firm to perform the audit.

A quality audit firm should satisfy the following criteria:

1. Performs more than 25 employee benefit plan audits each year- In recent years, the Department of Labor conducted a study of employee benefit plan audit by various CPA firms noting that the percentage of deficient audits is directly related to the number of audits a CPA firm performs. The lower number of employee benefit plan audits, the higher the deficiency rate of those audits.
2. Undergoes regular peer reviews and passes- The auditor should be able and willing to provide its most recent peer review report, which is required by the AICPA Peer Review Program.
3. Assigns licensed CPAs to perform the audit- The auditor should meet all licensing requirements for the state in which they practice.
4. Adheres to quality control and independence rules- The auditor should be able to establish independence and follow the rules of auditor independence as laid out by the AICPA.
5. Has active association memberships- The auditor should be an active member of the AICPA. It is strongly recommended to choose an audit firm that is a member of the AICPA Employee Benefit Plans Audit Quality Center (EBPAQC), which was formed to help promote the quality of employee benefit plan audits. Firms that are members of the EBPAQC have shown a commitment to the EBP practice area and are required to meet certain levels of training and perform certain quality control functions within their employee benefit plan practice.

If you are a fiduciary of a plan and responsible for making a decision on selecting an audit firm, remember that you must perform this duty with care, skill, prudence, and diligence.

Questions? Contact a member of our employee benefit plan team at KLR (Also – we’re glad you asked - we audit approximately 100 plans annually).