State Board Report
The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) released its anticipated report on "Assessing the Quality of Employee Benefit Plan Audits" on May 28. For the 2011 filing year, 81,162 audit reports on employee benefit plans (EBP) were submitted to the EBSA by 7,330 different CPA firms. To study the quality of those reports, the EBSA reviewed a statistically valid sample of 400 plan audits performed by 232 firms. They found 61 percent of those audits fully complied with professional auditing standards or had only minor deficiencies. The other 39 percent contained major deficiencies with respect to one or more relevant GAAS requirements, which would lead to the rejection of a Form 5500 filing. The ESBA reports this put $653 billion and 22,500,000 plan participants and beneficiaries at risk.
As ESBA studies conducted in 1988, 1997 and 2004 previously found, once again the smaller the firm’s employee benefit plan audit practice, the greater the incidence of audit deficiencies. The current study found CPAs often failed to consider the audit areas unique to employee benefit plans. However, the EBSA notes, firms that were members of the AICPA’s Employee Benefit Plan Audit Quality Center did tend to have fewer audits containing multiple GAAS deficiencies.
"NASBA representatives have been meeting with the Employee Benefits Security Administration’s Chief Accountant, Ian Dingwall, and his staff, and we are pleased to see the recommendations contained in this report demonstrate the Department of Labor’s desire to work more closely with the State Boards, to bring them into the information loop in a timely way when substandard work is submitted by the Boards’ licensed firms," NASBA Executive Vice President Colleen K. Conrad observed.
The report lists several recommendations involving State Boards for the ESBA to pursue:
Other recommendations include: Amend the ERISA to allow the Secretary of Labor to establish accounting principles and audit standards, and set regulations concerning the qualification requirements for those accountants performing employee benefit plan audits; Work with the AICPA’s Peer Review staff to make Peer Review more responsive in helping to improve employee benefit plan audit quality; Amend the ERISA to repeal the limited-scope audit exemption; And continue and expand ESBA’s outreach activities.
The full report will be discussed at NASBA’s Regional Meetings this month.
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