The search is on for an accounting firm to perform the required audit of your employee benefit plan. In determining which proposal to accept, one must question the difference between the low end and the high end of the pricing spectrum. The intent of this blog is not to infer that everyone should hire the most expensive accounting firm in order to receive a quality audit, but instead to ensure that the firm that is hired does quality work that meets the requirements set by the Department of Labor.
According to the American Institute of Certified Public Accountants, the Employee Retirement Income Security Act holds plan administrators responsible for ensuring that plan financial statements are audited in accordance with generally accepted auditing standards. The potential penalties for a missed or rejected filing can be significant. The DOL has the right to reject plan filings and assess penalties of up to $1,100 per day, without limit, on plan administrators for deficient filings.
The DOL has determined that the following factors could contribute to a deficient filing:
- Lack of experience and/or technical training on the part of auditors conducting employee benefit plan audits.
- Lack of established quality review and internal process controls.
- The lack of necessary audit work performed.
- The failure of auditors to understand the limited scope audit exception.
It is vital that each organization in need of an employee benefit plan audit be aware of their specific needs. While accepting proposals, do research on each firm and the requirements set forth by the DOL. It is important to understand that changes within the plan, (change in third party administrator for example), may have an impact on the cost of the audit. Again, hiring the most expensive accounting firm is not ideal, but hiring an audit team that is capable and experienced will be highly beneficial.
By Sarah McFarland