Publications

Employer Responsibility for Employee Benefit Plan Audits

By Geller Group Ltd.

The Pension and Welfare Benefits Administration (PWBA) of the Department of Labor is responsible for administrating and enforcing the fiduciary, reporting and disclosure provisions of Title I of the Employee Retirement Income Secunty Act of 1974 (ERISA). The PWBA is conducting a quality review program to determine the quality of audit work performed by independent auditors in the audits of financial statements for qualified plans that are required by ERISA.

Practitioners who are deemed by the PWBA to have performed significantly substandard audit work are referred to either the applicable state license boards or the AICPA Professional Ethics Division for further investigation. ERISA imposes upon plan administrators (i.e., employers) the responsibility for making certain that plan financial statements are audited in accordance with generally accepted auditing standards.

These practitioners could face severe consequences, including loss of license and loss of membership in the AICPA, if found to have performed deficient employee plan audits. Plan administrators could face monetary civil penalties under ERISA if found to file deficient audit reports.

The PWBA has continued its aggressive program to make certain that plan administrators comply with ERISAs reporting and disclosure requirements. Employee benefit plans need to satisfy specialized financial, operational and regulatory requirements. Auditors have responsibilities for compliance for these requirements.

The PWBA, in their review of employee benefit plan audits, have noted the following common deficiencies: the application of the limited scope audit exemption, the failure to provide comparative financial statements, the failure to obtain proper certification from the plan custodian, the failure to prepare adequate work papers, and the [ailure to address plan documentation deficiencies.

Best practices for employers to improve audit quality would include retention of professionals trained and experienced in auditing employee benefit plans and the coordination with other professionals experienced in employee benefit plan accounting. Employers need to coordinate all phases of the plan audit, and introduce the auditor to the plan's third party administrator, benefit consulting firm and legal counsel. Employers that implement best practices significantly improve audit quality and client service, and reduce related enforcement and litigation risks.

Geller Group Ltd. are benefit consultants and certified public accountants providing integrated and cost effective solutions for employee benefit plan sponsors. Sheldon M. Geller, Managing Director, is a pension attorney and certified public accountant responsible for ERISA qualified plan consulting services. Contact him by e-mail at gellers@gellergroupltd.com.
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