Recently I attended the AICPA’s Employee Benefit Plan Audit Quality Center Designated Partners webinar. It is always a very informative event, and this year was no exception. The Department of Labor (DOL) gave an interesting update on plan audits and audit quality. Here are a few of the statistics that were mentioned:
Audit Landscape (2018 Form 5500 database – filed in 2019)
- 83,000 plans subject to audit – covering 125 million participants and including $8.2 trillion in assets
- 4,758 CPA firms performing audits (down from 7,330 CPA firms in 2011)
Audit Quality Trends
- 16 firms audit more than 750 plans – 26% of audits, covering 41% of plan assets
- 39 firms audit between 200 and 750 plans – 15% of audits, covering 32% of plan assets
- 64 firms audit between 100-199 plans – 10% of audits, covering 10% of plan assets
- 4,639 firms audit less than 100 plans – 49% of audits, covering 17% of plan assets
It was interesting to hear that there have been more firms leaving the 5500 database than new firms entering since about 2014. I suspect that many firms have elected to stop doing EBP audits because of the focus on audit quality and increased scrutiny from peer reviewers and the DOL. One item pointed out was that the average deficiency rate for plan audits is around 40%, but I don’t think that tells the whole story. The deficiency rates ranged from 12% to 76%. Not surprisingly, the firms that performed more EBP audits had fewer deficient audits, while the firms that completed fewer EBP audits had higher deficiency rates. When you are looking for a plan auditor, ask how many plans they audit, not just how big the firm is. The size of the firm doesn’t really matter; the determining factor is the number of plans audited.
The webinar also covered the DOL’s initiatives for 2021. The DOL will be focused on plans that file their Form 5500 without an audit report, or file their Form 5500 late or don’t file at all. If you are required to file a Form 5500 with an audit report, make sure you have your audit complete by the filing deadline. If you get a notice from the DOL, please pay attention to it. The DOL will usually work with you if you have an issue, but not if you ignore them.
For more information feel free to contact Mark Blackburn at firstname.lastname@example.org.