Top 5 Key Insights from DOL’s Employee Benefits Audit Quality Study
February 6, 2024 Benefit Plans

In November 2023, the Employee Benefits Security Administration (EBSA) of the US Department of Labor (DOL) released its fourth evaluation of the audit work conducted by independent qualified public accountants. This evaluation specifically scrutinizes the performance of audits for employee benefit plans governed by the Employee Retirement Income Security Act of 1974 (ERISA) during the 2020 filing year, corresponding to plan years commencing in 2020. Notably, this evaluation pertains to the period preceding the implementation of Statement on Auditing Standards (SAS) No. 136, which dictates the criteria for forming opinions and reporting on financial statements of employee benefit plans subject to ERISA. By focusing on the 2020 filing year, the assessment enables a comparative analysis with previous evaluations.

Here’s a breakdown of the Top 5 key findings.

1. Encouraging Reduction in Deficiency Rates
The DOL’s review uncovered that only 30% of the 307 plan audits examined exhibited major deficiencies. While this figure marks an improvement, it remains pivotal to strive for greater precision in audit procedures.
2. Size Matters: Audit Firm Size and Quality
An intriguing correlation emerged between the size of audit firms and the quality of audits rendered. Notably, firms conducting 100 or more audits annually demonstrated markedly lower deficiency rates compared to their smaller counterparts. Size, it seems, does wield influence in this context.
3. Peer Review Anomalies
Contrary to conventional expectations, the DOL’s analysis revealed that possessing a favorable peer review rating doesn’t invariably translate to superior audit quality. Many audits marred by deficiencies hailed from firms that had received commendable peer review evaluations. This incongruity warrants thoughtful consideration and has been raised as an issue with the AICPA seeking changes to their processes.
4. Significance of Quality Center Membership
Membership in the AICPA’s Employee Benefit Plan Audit Quality Center emerged as a distinguishing factor in audit quality. Firms affiliated with the Quality Center exhibited notably lower deficiency rates compared to non-members. Embracing such professional communities evidently augments audit integrity.
5. Critical Focus Areas
The assessment spotlighted specific audit domains prone to deficiencies, notably participant data, contributions received, and benefit payments. Administrators are advised to exercise heightened vigilance in these nuanced realms.

Conclusion: Choose Wisely

While strides have been made in reducing deficiency rates, discerning the selection of audit firms remains paramount for plan administrators. Beyond relying solely on peer reviews, assessing the volume of audits undertaken and the firm’s affiliation with professional bodies such as the Quality Center proves instrumental in ensuring audit efficacy.

Verification Protocols

  • Verify the firm’s membership status in the Quality Center via the AICPA’s official platform.
  • Ask about the number of plan audits they’ve handled.
  • Inquire about any specific concerns from recent peer reviews or DOL inspections related to employee benefit plans.

The BMF Difference

Given the results of this study, BMF underscores its enduring dedication to audit excellence. Our steadfast commitment to audit quality assumes heightened significance in light of these findings. As a firm, BMF audits well over 100 employee benefit plans. And since the year of its original founding, BMF has remained an active member of the AICPA’s Employee Benefit Plan Audit Quality Center and, in fact, one of our partners is a past member of their executive committee. This affiliation empowers our audit team with ongoing access to robust resources, fostering the maintenance of high-caliber audit standards and technical proficiency. This unwavering commitment is a cornerstone in delivering dependable and compliant employee benefit plan services to our valued clients, aligning seamlessly with DOL mandates and requirements.

We audit and/or prepare the appropriate tax filing and summary annual reports for employee benefit plans including reports attached to Form 5500 and health and welfare plan trusts filing on Form 990, public companies with 11-K filings and plans with as few as 100 or as many as nearly 50,000 participants and several billion dollars in assets.

Our commitment to maintaining high quality and technical expertise is evidenced by our training and supervision of staff, our demonstrated continuity of staff on plan audit engagements, the high level of our participation (as both participants and speakers) in national and state conferences, and the positive marks of our Peer Review and PCAOB inspection results.

If your employee benefit plan is required to have an audit, it is your duty to hire an auditor who is licensed or certified as a public accountant by a state regulatory authority. We are available to discuss our services, experience and quality and how we can best serve the needs of your compliance requirements.

About the Authors

James E. Merklin
James E. Merklin
Partner, Assurance and Advisory


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