Six Tips from a 30-year EBP Auditing Veteran
I tackled my first employee benefit plan audit in 1984. It was a full-scope defined benefit plan audit, and I’m proud to say that I still have that same audit client today. As a sole practitioner with three staff members, I spend about 30% of my time conducting 12 EBP audits annually. I also peer review EBP audits for other firms.
Much has changed since 1984. Between 2006 and 2015 alone, the AICPA Employee Benefit Plans—Audit and Accounting Guide increased two to three times in size. The number of service providers and the types of investment options have also grown. Some firms used to use EBP engagements as “fill work” during slow periods, but with the complexities that we now see in these plans, specialization is a necessity.
When I speak at conferences and visit firms as a peer reviewer, I often get questions from CPAs looking to get into EBP auditing or to improve their practices. The following are some frequently asked questions and answers that I hope you’ll find helpful:
Q: How do I keep up with all of the changes?
A: Keeping up with changes is the greatest challenge for any EBP auditor. First, consider limiting the types of plans you audit, or even trimming the non-EBP services you provide. For example, I no longer do tax work and don’t audit multi-employer plans, 403b plans or ESOPs. Second, you want to make sure you’re up-to-date on the latest standards and guidance for the types of plans that you audit. The free employee benefit plan auditing knowledge checks on the AICPA | CIMA Competency and Learning website can help you identify gaps, and the website offers targeted learning resources to help you close knowledge—or skill—gaps. It’s a good place for beginners and can help more experienced auditors get a tune-up. Up-to-date continuing professional education and third-party practice aids are also essential.
Q: What is the most common problem you see as a peer reviewer?
A: EBP plans are different from other types of audits. Before auditors accept an EBP engagement, it’s critical that they fully understand the nature of different types of plans and how to test contributions, benefit payments, participant data and party-in-interest/prohibited transactions.
Q: Do you have recommendations for selecting a peer reviewer?
A: Peer review allows confidential identification and correction of problems that could get you in trouble with the Department of Labor. As such, you want to be sure your firm’s peer review team includes an EBP specialist who will perform the same kind of rigorous review as the DOL. Ask whether your EBP peer reviewer is a member of the AICPA Employee Benefit Plan Audit Quality Center. You will also want to know how many years of experience your reviewer has both as an EBP auditor and peer reviewer, and how many EBP audits and peer reviews he or she does annually.
Q: What kind of auditing software should I use?
A: With few exceptions, I’ve found that standard engagement workflow tools and practice aids are sufficient. What’s most important is to invest the time in learning the analytical and reporting capabilities of service providers’ (custodians’) systems. In most cases these systems can perform highly sophisticated analysis in both standard reports and queries specific to your needs. When used properly, these tools can save time and help you perform a better audit.
Q: I’m just starting out. What should I do first?
A: CPAs get in trouble with EBP audits when they don’t fully commit to the practice area. Some don’t charge enough to cover all the work that needs to be done. It’s extremely difficult to stay current if you only do one or two EPB audits each year. Become a specialist and develop this practice area. Look for current professional resources and ensure your firm’s policies and procedures are up to date. Membership in the AICPA’s Employee Benefit Plan Audit Quality Center is extremely helpful. Also, make the time to attend EBP conferences, consult with specialists and participate in CPE learning.
Q: Which resources do you recommend?
A: When I attend or participate online in a conference such as the AICPA Employee Benefit Plans Accounting, Auditing and Regulatory Update or an Employee Benefit Plan Audit Quality Center webinar, I download or print the conference presentations. These presentations from the Department of Labor and other experts highlight what you need to know.
My 30 years of performing EBP engagements have been intellectually challenging and rewarding. For the CPA willing to invest in becoming an EBP specialist, there’s growing opportunity to partner with other firms that don’t specialize in EBPs. If you’re interested in focusing on EBP audits, I encourage you to network with other CPAs practicing in this area and take advantage of the AICPA’s EBP resources.
William (“Bill”) G. Lajoie, CPA, CFE, CFF, is principal of the CPA practice, William G. Lajoie, P.C. in Centennial, Colorado. He has performed over 400 peer reviews and is a member of the AICPA Peer Review Board.
Auditing words courtesy of Shutterstock.
Source: AICPA
