Large employee benefit plans must have an independent qualified public accounting (IQPA) audit report attached to the Form 5500 filing. Effective January 1, 2023, the determination for being a large or small plans is based on the number of participants with account balances at the beginning of the plan year, except for new plans, which will use the count as of the end of the plan year. In general, when the number of participants with an account balance is 100 or more, an audit is required.

The Importance of Choosing the Right Auditor

Choosing the right auditor is crucial for a plan sponsor to fulfill their legal responsibility of filing a complete and accurate Form 5500 Annual Return/Report of Employee Benefit Plan. According to the Department of Labor (DOL), the most common reason for a deficient audit report is the auditor’s failure to test areas unique to employee benefit plan audits. By engaging an experienced plan auditor, plan sponsors can avoid these failures and ensure a quality audit.

Considerations for Choosing an Employee Benefit Plan Auditor

• Is the Firm a member of the American Institute of CPAs (AICPA) Employee Benefit Plan Audit Quality Center? If yes, the firm is committed to providing quality audit services and voluntarily adheres to the Center’s membership requirements. These requirements include focused training and employee benefit plan-specific continuing professional education.
• Level of experience with employee benefit plan audits (EBPA). Some plan sponsors tend to select an EBP auditor based solely on the lowest price offered. However, this approach may result in higher costs, as the Department of Labor (DOL) may deem the audit inadequate, leading to more expenses.  Also, choosing an inexperienced auditor may lead to wasted time due to inefficiencies, as the auditor may not fully understand the unique nature of EBPAs.  Therefore, selecting an auditor with significant experience, recent training to stay current with the ever-changing regulations for EBPs, and familiarity with the required procedures is crucial.
• Who will be included in the audit team for EBP? Will the team leader be experienced and knowledgeable, and will they be directly involved in all stages of the engagement? The involvement of inexperienced staff without proper supervision could result in an additional time burden for the plan sponsor.
• Would the timeline for the fieldwork and issuance of the financial statements be suitable for you? Can you be sure that the licensed CPA firm will meet your needs and issue the audit report to ensure that Form 5500 is filed completely, accurately, and on time?
• The CPA firm should provide references from both long-standing and new clients.

PBMares, LLP is an AICPA Employee Benefit Plan Audit Quality Center member. We provide focused training for our EBPA team and are committed to staying up-to-date on EBP regulatory issues. We are knowledgeable in working with various types of EBP and platforms. If you want to discuss our experience related to Employee Benefit Audits in more detail, please contact us.