DOL Audit Quality Study Underscores the Need for Specialized EBP CPA

In November 2023, The U.S. Department of Labor (DOL) Employee Benefits Security Administration (EBSA) published its Audit Quality Study, which outlines work quality as performed by independent qualified public accountants—specifically in employee benefit plan financial statement audits covered under the Employee Retirement Income Security Act (ERISA) during its 2020 filing year. The administration focused on 2020 given this was the year preceding a requirement that auditors comply with the new audit standard SAS 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA.

The study found 30 percent of audits had one or more major deficiencies relevant to Generally Accepted Auditing Standards (GAAS). The smaller the firm’s employee benefit plan audit practice, the higher its audit deficiencies. Specifically, CPA firms performing just five or fewer audits per year had more deficiencies than firms performing five or more. Of deficiencies found were areas unique to employee benefit plans, such as benefit payments, contributions, and participant data. Audits performed by members of AICPA’s Employee Benefit Plan Audit Quality Center (EBPAQC) also had significantly fewer deficiencies.

The administration has recommended increased education, outreach, regulation, and enforcement. This includes a focus on CPA firms with a smaller employee benefit plan audit practice managing plan audits with large amounts of assets. Additional recommendations include enhanced investigation and sanctioning of CPAs performing significantly deficient audit work and collaborations with AICPA to improve transparency. The study also recommends expanded outreach to plan administrators highlighting the importance in hiring competent CPAs along with increased communications with state licensing boards on the need to ensure only competent CPAs perform employee benefit plan audits.

AAFCPAs audits 190+ 401(k), 401(a), 403(b), and defined benefit plans every year. The firm has an unblemished history and proven expertise in ERISA standards. Learn more about AAFCPAs’ Employee Benefit Practice >>

If you have questions, please contact Davide Villani, CPA, CGMA, Partner, Employee Benefit Plans at 774.512.4012 or dvillani@nullaafcpa.com, Shawn P. Huxley, CPA, MSA, Partner, Employee Benefit Plans at 774.512.9075 or shuxley@nullaafcpa.com—or your AAFCPAs Partner.