Findings from a recent audit quality study (2014 Study) found that nearly 4 in 10 employee benefit plan (EBP) audits in the 2011 plan filing year contained major deficiencies and failed to meet regulatory standards. Assets held in those plans with deficient EBP audits totaled $653 billion. The 2014 Study, conducted by the Department of Labor’s Employee Benefit Security Administration (EBSA), reflects a statistical analysis of 400 financial statement audits of plans that are subject to the Employee Retirement Investment Security Act of 1974 (ERISA). The 2014 Study found that 39% of the 400 plans audited by 232 accounting firms, failed to meet at least one professional standard. About 17% of plans failed to comply with one or more ERISA reporting and disclosure requirements. EBSA performs studies to gauge whether the audit work conducted by independent qualified public accountants is improving. The 2014 Study’s noncompliance rate is the highest it’s been since EBSA started conducting audit quality studies in 1988. In 2004, when a previous study was published, the noncompliance rate was 33%.

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Audit Quality
Study Year
1988 1997 2004 2014
Audit Deficiency
Rates
23% 19% 33% 39%
Factors to Noncompliance
Certain patterns emerged in the 2014 Study on the
quality of EBP audits. For one, deficiencies tended
to fall in areas that are specific to EBPs, such as
contributions, benefit payments, participant data and
prohibited transactions.
Audit firms meeting the following criteria were more
likely to perform deficient EBP audits:
• Small EBP Practice – Approximately 95% of all
firms that conduct EBP audits perform less than
25 on an annual basis. Firms that performed two
or fewer EBP audits had the highest generally
accepted auditing standards (GAAS) deficiency
rates at 76%. More than half of EBP audits in that
stratum (56%) had five or more major deficiencies.
Firms that provided between 100 and 749 EBP
audits per year had deficiency rates of 12%. One
in three EBP audits had five or more deficiencies.
• Not a member of the AICPA’s Employee Benefit
Plan Audit Quality Center (EBPAQC) – Member
firms of the EBPAQC fared better in the 2014 Study
than non-members. The audit deficiency rate for
nonmembers was 82.3%. EBPAQC members had
a 30% audit deficiency rate. On average, EBPAQC
member firms also had fewer audits with multiple
GAAS deficiencies.
Findings from a recent audit quality study (2014 Study)
found that nearly 4 in 10 employee benefit plan (EBP)
audits in the 2011 plan filing year contained major
deficiencies and failed to meet regulatory standards.
Assets held in those plans with deficient EBP audits
totaled $653 billion.
The 2014 Study, conducted by the Department of
Labor’s Employee Benefit Security Administration
(EBSA), reflects a statistical analysis of 400 financial
statement audits of plans that are subject to the
Employee Retirement Investment Security Act of
1974 (ERISA). The 2014 Study found that 39% of the
400 plans audited by 232 accounting firms, failed to
meet at least one professional standard. About 17%
of plans failed to comply with one or more ERISA
reporting and disclosure requirements.
EBSA performs studies to gauge whether the
audit work conducted by independent qualified
public accountants is improving. The 2014 Study’s
noncompliance rate is the highest it’s been since
EBSA started conducting audit quality studies in
1988. In 2004, when a previous study was published,
the noncompliance rate was 33%.
June 2015
Department of Labor Releases Employee Benefit Plan Audit Quality Study

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The 2014 Study found no correlation among the
following:
• Employee Benefit Plan Training – Firms failed to
meet audit standards because they did not have
the toolset to meet compliance requirements or
they did not use the technical materials they had
available. Firms with internal, EBP specific training
had noncompliant audits, indicating that even if
technical resources are available, they may not be
used properly during an EBP audit.
• Peer Review Rating – EBP audits conducted
by CPAs are reviewed as part of the AICPA’s
Practice Monitoring Peer Review Process. A CPA
firm’s peer review, however, had little bearing on
its EBP audit compliance. Approximately 52% of
CPA firms that received clean peer reviews had
deficient EBP audits.
Implications for Plan Auditors
Because audit compliance is not improving, employee
benefit plans and their auditors will need to prepare
for increased scrutiny by the EBSA.
EBSA recommends enforcement efforts target CPA
firms with small EBP audit practices that audit EBPs
with large amounts of plan assets. It also will be
looking at firms in the 25-99 EBP audit stratum. The
stratum contains roughly $317.1 billion of plan assets
and 9.3 million plan participants, and had a 41% audit
deficiency rate in the 2014 Study.
The 2014 Study also proposes that the DOL work
with the National Association of State Boards of
Accountancy and the AICPA to ramp up sanctions for
auditors who consistently perform deficient audit work.
This may mean state boards accept the results of
investigations performed by the AICPA’s Professional
Ethics Division or by EBSA, and then discipline
noncompliant CPAs. EBSA is also proposing that
state boards require additional licensing for auditors
of EBPs.
To improve the Practice Monitoring Peer Review
Process, EBSA recommends working with AICPA’s
Peer Review staff to: streamline the process and
make it more responsive, ensure a sufficient peer
review has been performed and identify the CPAs
who have had deficient peer reviews and refer them
to the applicable state accounting board.
Proposed Changes to ERISA
The 2014 Study proposes several changes to
be made to ERISA. One would be to expand the
definition of qualified public accountant to include
additional requirements EBP auditors must meet. The
DOL would have the power to determine what these
requirements would be.
Another would allow the DOL to delegate all or part of
civil penalties for deficient audit work to the CPA who
conducted the plan audit if the CPA’s deficient audit
work resulted in the rejection of the plan’s Form 5500
filing.
As noncompliance rates are increasing, so, too is
the number of limited scope audits of EBPs. In 2001,
48% of EBP audits were limited scope, and in 2013,
83% of all EBP audits were limited scope. EBSA is
recommending a repeal of the limited scope audit
exemption. Currently, CPAs do not issue an opinion
on financial statements for assets held by regulated
entities (often financial institutions) in a limited scope
audit. Close to 60% of the limited scope audits in the
2014 Study contained audit deficiencies.

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The information in this MHM Messenger is a brief summary and may not include all the details relevant to your situation.
Please contact your MHM auditor to further discuss the impact on your audit or audit report.
EBSA would like to have the power to establish
accounting and auditing standards that are specific to
EBPs or have a substantial affect on them. Currently,
accounting standards for EBPs are established by the
Financial Accounting Standards Board (FASB) and
auditing standards for EBPs are established by the
American Institute of Certified Public Accountants
(AICPA).
For More Information
EBSA will be reaching out to the state boards of
accountancy and audit firms in all plan strata about
the findings from the survey and the importance of
complying with ERISA.
For specific questions or concerns about the results
of the report, please contact Hal Hunt of the MHM
Professional Standards Group. Hal can be reached at
816.945.5610 or hhunt@cbiz.com.