Why Your Employee Benefit Plan Audit is Not a Necessary Evil
By Craig Dart
Does Your Plan Need to be Audited?
Large employee benefit plans are required to be audited annually and attach an independent auditors report to the filing of the plan’s tax return; also known as the Form 5500.
Selecting a Qualified Auditor
In 2015, the Department of Labor alerted plan administrators that selecting a qualified CPA who has the expertise to perform an audit in accordance with professional auditing standards is a critical responsibility in safeguarding the plan’s assets and ensuring compliance with ERISA’s reporting and fiduciary requirements.
Consider the following attributes when selecting a CPA to perform your plan audit:
- How many plans and what type of plans does the CPA annually audit?
- How much education and training has the CPA had in this area and how much time is spent on employee benefits?
- Is the CPA active with various employee benefit plan societies or organizations?
- Is the CPA a member of the AICPA Employee Benefit Plan audit Quality Center?
- What experience does your CPA have working with your other service providers such as the investment advisor or recordkeeper?
The Plan Audit is Not a Necessary Evil
Once a qualified auditor is selected you can expect the CPA to perform various auditing procedures including interviewing your employees, reviewing employee records, testing plan investments.
Is that it? You spend a whole lot of time and money, get an opinion and move on. Where is the value? It’s no wonder why companies hate going through the audit process and spending extra money. However, I would suggest that the audit can be so much more valuable than Companies may realize and here is why.
- An audit provides assurance that the plan assets exist and that participant statements are reasonably stated. When plan auditors are on-site, explain to our employees that the audit there is for their benefit.
- When you select a qualified CPA to perform your audit, the auditor has to obtain an understanding of how the plan operates. While your plan may operate fine, this is an “opportunity” to ask your auditor if there are other ways to operate the plan more efficiently in order to save time and money. Don’t pass this chance up.
- What about starting another plan or adding some new plan features? Your CPA should be able to provide some planning suggestions and discuss how plan changes can impact future audits.
- Your auditor can also identify weaknesses in internal control that you did not know you had. Don’t react, be proactive to ensure that you are discussing with your auditor ways to safeguard your plan assets.
- Do you understand the IRS and Department of Labor’s rules and how they impact your plan? Do you understand what your plan document says? In addition to your plan attorney, your CPA can also answer many of these questions.
Your audit should be viewed as an opportunity to help save time and money. It’s an opportunity to learn how to administer the plan more effectively. It’s an opportunity, not a necessary evil.
For more plan tips like these or ideas on how to properly plan for your audit, contact Craig Dart from C Dart CPA at 951-300-9600.