Generally, Federal law requires employee benefit plans with more than 100 active participants to have an independent audit of the plan performed and to include audited financial statements with the form 5500 filing. One of the most important decisions a plan administrator makes as part of their fiduciary duties is selecting a qualified, independent audit firm. So when making this decision, what really matters?
Three Factors to Consider When Choosing a Benefit Plan Auditor
1. Licensing for a benefit plan auditor
Federal law requires an employee benefit plan auditor to be licensed or certified as a public accountant by a State regulatory authority. In addition, the auditor must be independent and not have any financial interests in the plan or the plan sponsor.
2. Experience and training
Employee benefit plan audits are quite different from corporate audits. One of the most common reasons for deficient accountants’ reports is the failure of the auditor to perform tests in areas unique to benefit plans. The more training and experience an auditor has with employee benefit plan audits, the more familiar the auditor will be with specialized benefit plan auditing standards. Some key questions to ask when considering an auditor are: How many employee benefit plan audits do they perform each year? Does the audit firm have a dedicated team that focuses on employee benefit plan audits? Is there specialized employee benefit plan audit training?
3. Association memberships
Is the audit firm a member of the American Institute of Certified Public Accountants (AICPA) and the Employee Benefit Plan Audit Quality Center (EBPAQC)? The EBPAQC is a voluntary membership center to help firms meet the challenges of performing audits of employee benefit plans. Being a member requires the firm to be in compliance with rigorous standards and practices specific to plan audits. In addition, the AICPA and EBPAQC requires its members to have their audit practice reviewed by internal and external qualified auditors. Visit the EBPAQC site to learn more about the requirements.
Employee benefit plan audits have increasingly become the subject of examination by the DOL and IRS. An adverse examination from the DOL or the IRS related to an incomplete, inadequate, or untimely annual report may result in penalties being assessed against the plan administrator, so it is imperative to select a qualified employee benefit plan auditor. For a full list of member firms, click here.
LBMC is ranked as a top 40 benefit plan auditor in the nation. For more information visit our Employee Benefit Plan Audit page.