FOR LIVE PROGRAM ONLY Employee Benefit Plan Audit Peer Reviews Preparing for Risk Assessment, Control Document Inspection, and Other Peer Reviewer Concerns WEDNESDAY , JUNE 21, 2017, 1:00-2:50 pm Eastern IMPORTANT INFORMATION FOR THE LIVE PROGRAM This program is approved for 2 CPE credit hours . To earn credit you must: • Participate in the program on your own computer connection (no sharing) – if you need to register additional people, please call customer service at 1-800-926-7926 x10 (or 404-881-1141 x10). Strafford accepts American Express, Visa, MasterCard, Discover . • Listen on-line via your computer speakers. • Respond to five prompts during the program plus a single verification code . You will have to write down only the final verification code on the attestation form, which will be emailed to registered attendees. • To earn full credit, you must remain connected for the entire program. WHO TO CONTACT DURING THE LIVE EVENT For Additional Registrations : -Call Strafford Customer Service 1-800-926-7926 x10 (or 404-881-1141 x10) For Assistance During the Live Program : -On the web, use the chat box at the bottom left of the screen If you get disconnected during the program, you can simply log in using your original instructions and PIN.
Tips for Optimal Quality FOR LIVE PROGRAM ONLY Sound Quality When listening via your computer speakers, please note that the quality of your sound will vary depending on the speed and quality of your internet connection. If the sound quality is not satisfactory, please e-mail sound@straffordpub.com immediately so we can address the problem.
Employee Benefit Plan Audit Peer Reviews June 21, 2017 Jessie T . Kanter, CPA, Director of Quality Assurance BlumShapiro, Providence, R.I. jkanter@blumshapiro.com Susan J. Peirce, CPA, MTax, Principal Apple Growth Partners, Akron, Ohio speirce@applegrowth.com
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The DOL Emphasis on Deficient Audits Continues to have Significant Impact on Peer Review • EBSA Audit Quality Initiatives • Reporting Compliance Initiatives • DOL Resources • AICPA Response
Background Information – DOL Statistics 6
Background Information – DOL Statistics 7
Background Information – DOL Statistics 8
Other Meaningful Quality Factors based on the EBSA findings Peer Review is not a useful identifier of quality work In 4 of 6 strata, audits with 5+ GAAS deficiencies were performed by firms with clean peer review reports. 9
EBP Frequent Violations General Audit Failures The auditor did not obtain sufficient appropriate audit evidence Inadequate documentation of audit procedures Inadequate audit programs and/or planning Certifying entity is not qualified Overreliance on service auditor Internal Controls – risk assessment, understanding doc. Benefit responsive contracts – not recognized Participants’ data – multiemployer plans, participant allocations Testing of information given to the actuary Evaluation qualifications and reputation of actuary 10
AICPA/EBPAQC Response 11
AICPA EBPAQC Planning Tool Shared with permission of EBPAQC 12
AICPA EBPAQC Resources EAlerts Plan Advisories Webinars Primers Website Member-to- Tools member Resource Forum Centers 13
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AICPA response (continued) Early April 2016, the AICPA launched an employee benefit plan certificate program to allow practitioners to show their competency. 15
AICPA response to 2014 DOL and other findings 16
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AICPA response (continued) Creation of competency framework for employee benefit plans will help practitioners assess whether they have the competency needed for employee benefit plan financial audits and, if not, what curriculum they need to gain competency. 18
Peer Review is Evolving Each Year 19
Reporting Guidance Related to Peer Review Peer Review Alert 11-03 Unique risk associated with each type of plan Defined contribution Defined benefit Health and welfare 20
Enhanced Oversight “ A sound audit does not occur by chance.” Susan S. Coffey, CPA, AICPA executive vice president “ When the enhanced oversight program first started, the focus was on detecting quality challenges, but the primary focus has evolved to determining the characteristics of the firms we find are performing well, as well as digging deeper to discover why firms with performance issues are not performing well.” Jim Brackens, CPA AICPA vice president of ethics and practice quality. 21
Specific focus on reforms to enhance quality and accountability 2014 piloted an enhanced oversight program in which subject-matter experts conducted surprise examinations of a sample of engagements after the completion of peer review 2015 program was expanded 2016 pilot program was converted to a permanent part of the Peer Review Program and root cause analysis was introduced 22
Increased focus 2015 and 2016 peer reviews included increased focus on specialized industries Includes employee benefit plans Specialized industries Areas where peer reviewers and expert noted the greatest issues 2017 peer reviews will have greater expertise oversight and reviewers will perform enhanced assessment of firms’ quality control systems Expansion of data-matching via publicly available databases 23
Completeness of the Population Purpose of analyzing publicly available information from the Department of Labor’s ( DOL) EFAST2 database. The objective is to verify whether auditors performing 2014 and 2015 employee benefit plan (EBP) audits are properly enrolled in peer review and whether EBP audits were properly included within the scope of the firm’s peer review. 24
Impact of not enrolling or omission Firms that are not enrolled in the program as required by AICPA membership bylaws or their state regulatory authority will be referred to AICPA Professional Ethics Division or the appropriate regulatory or licensing authority. Firms that omit an EBP audit from the scope of their peer review will be notified that their most recent peer review acceptance letter will be recalled. The firm will be subjected to a hearing panel 25
Quality trends based on the Enhanced Oversight Analysis indicates the most common cause of material non-conformity in audits is a lack of adequate audit documentation Inadequate documentation is cause of >50% of non- conformity 2017 peer reviews will have increased emphasis on audit documentation 26
AICPA/EBPAQC assistance with peer review issues – audit documentation EBPAQC sponsoring Audit Documentation Webcast See June 9, 2017 EBPAQC Alert #393 Audit Documentation Resources The AICPA has created an audit documentation toolkit with resources to help your firm address common documentation issues. This is a component of the PCPS Invigorate the Focus on Quality toolkit, which contains even more resources to assist with audit quality in your practice. Journal of Accountancy article: Audit documentation: Tips for getting it right Staff Training: This PowerPoint presentation (with speaker notes) is designed to support firms as they train audit personnel on how to comply with AU-C section 230. Working Paper Template: This practice aid is intended to help auditors document the results of testing while meeting the requirements of AU-C section 230, Audit Documentation. In addition to a template that can be used in your audits, the aid includes examples of well-documented analytical procedures and detail testing. Internal Inspection Aid: Gear up for your firm's internal inspection by reviewing this aid, which is designed to support those performing the inspection as they identify and address documentation deficiencies. FAQs: Get answers to some of the most common questions the AICPA receives about documentation. 27
Reporting Requirements GAAP financial statements are required Additional regulatory requirements DOL reporting requirements IRS reporting requirements Peer reviews require adherence to ALL of the above requirements 28
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