The Department of Labor (DOL) has been conducting inspections of auditor work papers for several years and has noted a historical 32 percent deficiency rate and a trend of an increasing number of plans requiring audits with a decreasing number of CPA firms performing the audits. As a result, the DOL has launched a nationwide study of audit quality to be performed between October 2013 and September 2014. This study is intended to provide a current baseline of audit quality and will be based on 2011 Form 5500 filings.
The DOL has selected 400 individual benefit plans, stratified based on the number of plans each firm audits, resulting in the selection of 262 firms. As of December 12, 2013, the DOL has sent 160 workpaper request letters to individual plan administrators. These request letters instruct the plan administrator to inform their plan auditor and have them contact the DOL to coordinate the process of sending requested information.
Workpaper reviews will be performed in the Office of Chief Accountant's offices in Washington D.C. and the auditor will be required to provide all workpapers that support the audit opinion. There will only be one opportunity to submit the required information so it is very important to notify the plan auditor immediately upon receipt of the request letter to ensure a timely response. Undocumented work will result in a noted deficiency that may lead to the possible rejection of the plan’s Form 5500 filing and referral of the accounting firm to the AICPA and/or state licensing boards.
Since the request letters are being sent to the plan administrator that is listed on the 2011 Form 5500 filing, that individual may not be currently responsible for the employee benefit plan. Please circulate this information internally to those either formerly or currently involved with your employee benefit plan to ensure you have not received a request letter as a lack of response could result in an in-person visit from the DOL.
Information contained in this alert should not be construed as the rendering of specific accounting, tax, or other advice. Material may become outdated and anyone using this should research and update to ensure accuracy. In no event will the publisher be liable for any damages, direct, indirect, or consequential, claimed to result from use of the material contained in this alert. Readers are encouraged to consult with their advisors before making any decisions.