February 6, 2023
DOL Delivers Preliminary 2020 Audit Quality Assessment Findings
It’s been more than seven years since the Department of Labor (DOL) last issued an employee benefit plan (EBP) Audit Quality Study. The study focused on 2011 plan year audits, and the final report was released in May 2015, detailing a number of deficiencies in EBP audit quality. The DOL’s most recent inspection for 2020 plan year audits is nearing completion. During the December 2022 AICPA & CIMA Employee Benefit Plans Conference, the DOL shared preliminary findings from its latest inspection.
Plan Auditor Industry Is Shrinking
The DOL has noted significant decreases in the number of plan auditors since the 2011 plan year study of the firms auditing benefit plans. A few data points to highlight this shift:
| 2020 Study | 2011 Study |
|---|---|
| 86,800 Plan audits | 81,162 Plan audits |
| 4,300 CPA firms performing Plan audits | 7,330 CPA firms performing Plan audits |
| 3,745 or 90% Firms auditing < 25 plans | 6,806 or 93% Firms auditing < 25 plans |
| < 1% Firms auditing > 100 plans | 1.2% Firms auditing > 100 plans |
Preliminary Findings
The Employee Benefits Security Administration (EBSA) identified common deficiencies from their testing thus far, including:
- Inadequate review of executed plan documents
- Over-reliance on SOC 1 reports and insufficient review of complementary user controls
- Inaccurate definition of compensation utilized in testing of participant and employer contributions
- Incomplete testing of auto-enrollment and auto-escalation features
- Omission of inappropriate exclusion testing for participant eligibility
- Non-performance of benefit recalculations
- Failure to evaluate benefit payment eligibility
- Neglecting to test participant loan compliance for limited scope or ERISA 103(a)(3)(c) (if early adopted) audits
- Lack of attention to proper documentation of audit work
What’s Next?
The second and final phase of the audit quality study was completed in October 2022. The DOL continues to analyze the data and is drafting the report results. The final results are expected to be published in the first half of 2023.
See our article, Cutting Costs? Here’s Why Not to on Your EBP Audit on why plan administrators should care about audit quality for EBP plans.
Our Commitment to Quality
At Johnson Lambert, we perform 80+ employee benefit plan audits annually. Two-thirds of firms competing in the employee benefit plan audit market sign off on less than five audit opinions annually, according to Audit Analytics, December 2021. Johnson Lambert is proud to work with a significantly larger number of plans, which enables us to better serve and support our clients.
As members of the AICPA Employee Benefit Plan Audit Quality Center, we are committed to providing our clients with the highest quality of service. For more than 35 years, we have developed a niche focus to become experts in the unique aspects of employee benefit plan audits.
To learn more about Johnson Lambert’s EBP audit practice and qualifications, please contact us.
Kevin Vikander
Manager
