Hiring a 401(k) plan auditing firm is an important decision. Here’s how to ensure that you choose the right auditor for your next benefit plan audit.
Did you know that auditors get audited too? I know… Why should I care? Because:
The Department of Labor’s findings can help you hire the best 401(k) auditing firm for your next benefit plan audit. That’s why.
DOL, EBSA, and 401(k)s, oh my!
The Employee Benefits Security Administration (EBSA) at the Department of Labor (DOL) oversees the security of retirement and other job-based benefits. Every several years, EBSA issues a report on Audit Quality, randomly selecting and assessing hundreds of benefit plan audit reports. They published the fourth and latest report in 2023 on 2020 data.
The good news is, EBSA found that 70 percent of audits reviewed fully complied with professional standards, or had only minor deficiencies. A deficiency occurs when “the design or operation of a control does not perform as intended.”
However, 30 percent of the audits had “major deficiencies” vis-a-vis one or more accepted auditing standards requirements. That’s 3 out of 10…! Major deficiencies mean you can’t trust the accuracy of the audit performed. This is no small deal, putting $927 billion and 11.7 million plan participants and beneficiaries at risk.
This leads to the first critical question you must ask when hiring a 401(k) plan auditor:
Question #1 – How many 401(k) plan audits does your firm handle each year?
EBSA concluded that “there continues to be a clear link between the number of employee benefit plan audits a CPA performed and the quality of the audit work.” Put simply, the firm that performs more 401(k) audits each year is more likely to do them correctly.
For example, Cassell Plan Audits is dedicated to 401(k) plan audits, and 401(k) plan audits only. We perform over 100 audits annually and have completed hundreds over the lifetime of our firm. With our team of experts and 100+ years of combined accounting and auditing experience, we’ve seen just about everything.
By contrast, according to the Audit Quality Study, about half of CPA firms that perform employee benefit plan audits only audit one or two plans per year. The same study shows that CPAs performing fewer 401(k) plan audits tended to have the highest proportion of deficient audits.
Question #2 – Are they a member of the AICPA’s Employee Benefit Plan Audit Quality Center?
Say that ten times fast!
The American Institute of Certified Public Accountants (AICPA) provides guidance and resources to certified public accountants—including designations, certifications and credentials. The Employee Benefit Plan Audit Quality Center (EBPAQC) provides comprehensive resources to member employee benefit plan audit firms. It requires rigorous continuing education and peer review of its members.
EBSA’s Audit Quality Study found that audits performed by members of AICPA’s Employee Benefit Plan Audit Quality Center had a “significantly lower deficiency rate.”
Since we opened our doors, Cassell Plan Audits has achieved the highest “pass” level of peer review by the AICPA, certifying that we meet or exceed professional quality standards. Further, we surpass continuing education requirements, even at the more rigorous levels our Employee Benefit Plan Audit Quality Center membership demands.
If you’re hiring a 401(k) plan auditing firm, or if your current auditor or accounting firm can’t answer these two questions satisfactorily, let’s talk. We delight in making this annual task as brief and painless as possible for our clients. Contact Cassell Plan Audits today.
