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A DOL report on an alarming number of mishandled audits.
What happens if employee benefit plan auditors and administrators fail to recognize these plans' uniqueness and the risks associated with them? They could risk failure to comply with established standards for these plans, as one report illustrates. A Department of Labor review of 1992 plan year audits found many of the plans did not comply with applicable generally accepted auditing standards and Employee Retirement Income Security Act requirements. This article discusses ways CPAs considering or performing such engagements can minimize the risks and steps the DOL and the American Institute of CPAs expect to take to improve the quality of these audits.
The DOL's Pension and Welfare Benefit Administration examined a random sample of 267 employee benefit plan audits for the 1992 plan year. This review was a follow-up to one performed in 1987 by the DOL's Office of the Inspector General and aimed to ascertain the degree of compliance with applicable GAAS and selected ERISA reporting and disclosure requirements. While there has been some improvement in audit quality since 1987, it is clear that much remains to be done to raise the profession's overall performance in these areas to acceptable levels.
According to the DOL, 19% of the 1992 audits reviewed had one or more GAAS violations, down slightly from 23% in the 1987 review, and 33% had one or more ERISA reporting and disclosure violations, down significantly from 66% for 1987. Such exception rates mean there is a significant risk to plan administrators--who can face a $50,000 fine per audit--and for CPAs--who can be subject to disciplinary action by the AICPA …