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State Board Report

April 2013

Estimating he had sent out about 100 letters to Boards of Accountancy to alert them to substandard work performed by CPAs in their audits of employee benefit plans, Ian Dingwall, Chief Accountant of the Department of Labor, encouraged Executive Directors at their Tucson meeting to respond to these letters. Very few of the Boards’ executive directors attending the meeting recalled receiving such a letter. There continue to be problems with these audits, particularly those performed by those professionals who Mr. Dingwall termed “dabblers,” those performing only a limited number of employee benefit plan audits each year. Firms that are performing many of these audits are not as likely to have the problems uncovered by the DOL inspectors.

The Department of Labor’s Office of the Chief Accountant was established in 1989 to monitor and improve the quality of employee benefit plan audits and to identify and correct substandard audits. However, the DOL does not have the authority to establish special CPE or licensing standards for the CPAs who audit ERISA employee benefit plans, Mr. Dingwall pointed out. It is up to the State Boards to establish standards for competency. The Employee Benefits Security Administration can reject the plan’s annual report and penalize the plan administrator, but it cannot impose civil penalties directly on accountants for deficient audit work or for filing a deficient accountant’s opinion in the benefits plan’s annual report.

There are approximately 9,200 CPA firms performing 80,000 plan audits with $5.5 trillion in plan assets subject to audit. While 83 firms do the audits on larger plans, the vast majority of CPA firms are doing five or fewer benefit plan audits, Mr. Dingwall reported. His division has made over 700 referrals to the AICPA’s Employee Benefit Plans Audit Quality Center for rehabilitation. Although he said this has been a very positive program, rehabilitating about half of the firms, it is only for AICPA members, and the DOL contacts the State Board when the program cannot handle a firm. While audit quality has improved for the CPA firms that perform the largest number of plan audits, Mr. Dingwall observed: “Some of the small firms have not invested the time, effort and money in doing this right.”

He told the Executive Directors: “I am trying to get into a new relationship with you as we are uncertain what has been done with our referrals. We want to get to a better relationship.” He encouraged the Boards to consider requiring additional education for benefit plan auditors and he advised the EDs to call him directly with any questions.

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