U.S. Department of Labor Announces Plan for New Audit Quality Assessment

by Matthew V. Leiner

The U.S. Department of Labor (DOL) Employee Benefits Security Administration Office of the Chief Accountant is planning to revisit audit quality on the work performed by independent qualified public accountants (IQPAs) as it pertains to audited financial statements of employee benefit plans covered under the Employee Retirement Income Security Act of 1974 (ERISA) for the 2020 Form 5500 filing year, which includes the calendar year 2020 filings filed on extension by Oct. 15, 2021. 

The DOL previously performed a similar assessment of the quality of ERISA plan audits as it pertained to audited financial statements submitted with the 2011 Form 5500 filings. During this study, 400 audits were selected for review, giving eye-opening results.  The study showed that almost 40% of the audits selected contained significant deficiencies serious enough to prompt the DOL to refer cases with these deficiencies at the conclusion of their review to the applicable state board of accountancy of the IQPA firm and the American Institute of Certified Public Accountants (AICPA) Professional Ethics Division.  As summarized by the AICPA Employee Benefit Plan Audit Quality Center, deficiencies identified by the DOL were seen in the following audit areas: 

  • Investments  
  • Notes receivable 
  • Contributions received and receivable 
  • Benefit payments 
  • Participant data, including individual participant accounts 
  • Plan obligations 
  • Parties in interest/prohibited transactions 
  • Plan tax status 
  • Commitments and contingencies 
  • Administrative expenses 
  • Subsequent events 
  • Plan mergers and terminating plans 
  • Plan representations 
  • Compliance with GAAS and GAAP standards 
  • Compliance with DOL rules and regulations for reporting and disclosure 

For this new study, the DOL Employee Benefits Security Administration Office of the Chief Accountant is currently in the process of developing its methodology and expects to make sample selections and begin contacting selected plan administrators and IQPA firms by the end of 2021.  If selected for review, the IQPA firm will be required to provide a full set of audit work papers supporting the audit containing all documentation, including work papers maintained in other related files.  It is important to note that IQPA firms will have only one opportunity to provide all supporting work papers. So, it is critical that everything relevant to the plan audit is provided to the DOL upon the first request. 

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