Some accountants auditing employee benefit plans have a quality problem, said a study published Thursday by the Department of Labor's Employee Benefits Security Administration.
The study found that 61% of audits fully complied with professional auditing standards or had only minor deficiencies, but the remaining 39% had major deficiencies that were more likely to cause Form 5500 filings to be rejected and put $653 billion and 22.5 million plan participants and beneficiaries at risk. Those at-risk figures are higher than previous studies of plan audits.
Phyllis Borzi, assistant secretary of labor for employee benefits security, in a statement called for overhauling “the existing patchwork of regulations and rules” and creating a “meaningful” enforcement mechanism.
Ms. Borzi said the department is proposing legislation to fix the problems identified in the report. The legislation would redefine “qualified public accountant” with additional requirements and regulations. It would also seek to replace the current limited-scope audit exemption, which DOL officials said can undermine an auditor's adherence to rigorous standards.
The American Institute of CPAs said in a statement it takes the findings seriously and will work with the Department of Labor to enhance audit quality. It said the quality issues identified in the study did not “pose a risk to the viability of any plan.”
The AICPA, which agrees with repealing the limited-scope audit exemption, called on the DOL to educate plan sponsors on quality audits, and said it will work with auditors, plan sponsors, state CPA licensing boards and the Department of Labor to improve benefit plan audits.