Auditing the Auditor
Choosing an auditor to review a retirement plan is a fiduciary duty. That raises the stakes a tad. So how to make sure the audit is one that will pass muster with the Department of Labor (DOL)? A recent blog post offers some ideas.
In “The DOL’s Assessment on the Quality of Financial Statement Audits: The Aftermath,” CPA Maria Hurd of Belfint Lyons Shuman offers her observations on how to do just that. She does so in the context of an assessment the DOL conducted of work by independent qualified public accountants (QPAs).
Hurd notes that the vast majority — 93% — of the more than 7,000 firms the DOL looked at audited fewer than 25 retirement plans, and that the DOL found that approximately 70% of the audits the DOL reviewed were deficient. And that, Hurd observes, has consequences — such as Form 5500 filings being rejected and plan sponsors learning that the choice of auditor is part of their fiduciary duty.
Hurd offers some questions a plan can consider asking an auditor, including:
1. How many plans does the audit team audit?
2. What specialized retirement plan audit seminars has each person in the team attended in the past 12 months?
3. What credentials can the team show?
4. How many times has the DOL reviewed the accounting firm’s audit workpapers?
5. How many IRS audits have the retirement plan audit clients passed?
Hurd also suggests documenting inquiries one makes in order to ascertain an auditor’s dedication and commitment. And she adds a note of caution regarding the fiduciary duty to act in plan participants’ best interest.