DOL Update Lynne McMennamin, CPA Auditor DOL Employee Benefits - PowerPoint PPT Presentation

DOL Update Lynne McMennamin, CPA Auditor DOL Employee Benefits Security Administration The views expressed are those of the speaker and do not necessarily represent the official position of the Department

2 Overview EBSA Audit Quality Study • New Initiatives • Enforcement Initiatives • On the Horizon – Emerging Issues • DOL Resources • 2

3 Audit Quality Study

4 Statistical Sample of 400 Plan Audits • 2011 Form 5500 filings • 6 strata based on size of EBP practice • 1-2 plans • 3-5 plans • 6-24 plans • 25-99 plans • 100-749 plans • 750 + plans • 1 audit in lowest 2 strata, 5 in all others 4

5 Our Sample • Type of Audit • 80% = Limited Scope • 19% = Full Scope • 1% = Other • Plan Type • 89% = DC Pension Plan • 6% = DB Pension Plan • 5% = Welfare Plan 5

6 Our Sample • Sponsor Type • 95% = Single Employer • 3% = Multi-Employer • 2% = Multiple Employer • EBPAQC Member • 55% = Yes • 45% = No 6

7 Findings

8 Size of EBP Practice Matters • Correlation between a firm’s EBP practice and deficient work • Nearly 75% of plan audits were deficient in firms who audit 1-2 plans annually • Deficient audits in this strata also had many more deficiencies • 75% of deficient plan in audits in the 1-2 strata had deficient audit work in 5 or more areas • Uniformly higher deficient work in all audit areas • Less EBP specific training by firms in this strata 8

9 Practice Monitoring/Peer Review are not Useful Identifiers of Quality EBP Audits • Over 90% of firms in 6-99 strata who performed deficient EBP audits received clean peer review reports • In 4 of 6 strata, firms had clean peer review reports where we identified deficient EBP audit work • Nearly 70% in 1-2 strata • 85% in the 3-5 strata • In 4 of 6 strata, audits with 5+ deficiencies were performed by firms with clean peer review reports 9

10 Other Useful Findings • No meaningful correlation between audit fees and the quality of audit work • EBPAQC member firms performed higher quality work than non member firms • Audit work is often of lesser quality in engagements where firms have less expertise • Problematic audit areas continue to be the same EBP-specific areas as previously identified 10

11 Referrals of Deficient Audit Work • 131 referrals made to the AICPA’s Professional Ethics Division • 13 referrals made to state boards of public accountancy 11

12 What Is Our Current Focus? • High Risk Audit Engagements • Health and Welfare Plans • ESOPs • Plans with hard-to-value assets • Re-inspections of CPA firms • Continued Outreach to EBP Stakeholders 12

13 New Initiatives

14 Peer Review • Are CPAs complying with state peer review licensing requirements? • Practitioners in states with peer review requirement • Provide evidence that an acceptable peer review was performed 14

15 Peer Review • CPAs performing audits (in the Form 5500 database) –that are not in the AICPA’s peer review records • AICPA has found numerous CPAs performing attest engagements that have not been enrolled in the peer review program 15

16 Licensure • Are firms properly licensed where they practice? • Rules vary by state • NASBA website – auditor mobility • NASBA provided list of plan auditors to states • States reviewing to see if CPAs are properly licensed 16

17 Enforcement Initiatives

18 Reporting Compliance Enforcement • Reporting of fidelity bonding status • Missing audit reports • Compliance with Small Pension Plan Audit Waiver requirements 18

19 Reporting Compliance Enforcement • DFVC program compliance • Plan asset accountability • Health & welfare plan non-filers • Stop filers (cooperative initiative with IRS) 19

20 Health & Welfare Benefit Plans • Benefit claims adjudication/payments is very complex and there is inherently a high risk of errors, misstatements or fraud. Plan accordingly. • Must be paid in the correct amount timely, in accordance with plan documents • Only to or on behalf of eligible, covered persons entitled to receive benefits 20

21 Health & Welfare Benefit Plans • Properly recorded and described in plan financial statements • Type 2 SOC 1 reports may not include controls over whether the claim or benefit payment was appropriately calculated based on the provisions of the plan instrument. 21

22 On the Horizon – Emerging Issues • New Actuarial Study Longevity Improvements Considerations • FASB Simplification Project • Auditing Standards Board Project to Improve Plan Audit Reports • EFAST 3 and Form 5500 Changes • New AICPA Audit Quality Center Tools 22

23 DOL Resources • www.dol.gov/ebsa • For DOL publications, FAQs, copies of the Form 5500, instructions, and related schedules • EBSA Office of the Chief Accountant 202-693-8360 • EBSA Office of Regulations and Interpretations 202-693-8500 • For questions about ERISA reporting, filing or other regulatory requirements • DOL EFAST Help Center 1-866-463-3278 • For questions regarding the Form 5500 or related schedules 23