The document discusses the importance of selecting qualified audit firms for employee benefit plans, highlighting that 39% of recent audits had major deficiencies that could jeopardize plan compliance. It emphasizes the need for thorough vetting to avoid potential risks and penalties, while noting that the Department of Labor has identified significant shortcomings in audit quality. Recommendations include enhancing due diligence in the audit selection process and being aware of auditor qualifications to improve overall compliance and protect participants' interests.

1. THE STANDARD ADVISOR COUNCIL
AUSTIN, TEXAS - SEPTEMBER 10, 2015

2. 2
Assisting Your Clients –
How to Navigate The Audit Process
39% of Plan audits in the most recent sample had
major deficiencies that would lead to rejection of a
Form 5500 filing. Putting 22.5 Million people at risk.
~2014 DOL AUDIT QUALITY STUDY
76% of Plan audits were deficient in
firms that audit 1-2 plans annually
~2014 DOL AUDIT QUALITY STUDY
EBSA also agreed to evaluate OIG's suggestion that
it advise plan administrators of the potential for
fiduciary breaches from selection of QPAs known
to produce deficient audits and to consider the
other suggestions in the report regarding
enforcement tools
~2012 DOL – Office of the Inspector General Report

3. Presentation Purpose
3
Why is it important and
how can it impact you?
Assisting clients with the audit firm selection
process can be an opportunity to add value to
your client relationship
Vetting plan audit firms and correspondence
may lead to valuable referral relationships
Save clients from the possible risk of fines and
penalties
Possible co-fiduciary responsibility in selecting
other plan service providers
How to develop a proactive approach for
assisting clients with the audit process

4. What is the Worst Case Scenario
What is the worst that can happen if a Plan Sponsor does not perform necessary due diligence in
selecting a Plan Auditor?
4
• An unlicensed CPA formerly based in Arizona was completing employee benefit plan audits for over a
decade.
• Affected a significant number of plans.

5. Presentation Overview
5
(1)Background Information
* Audit Requirement
* DOL Audit Quality Study
Overview
(2) How to assist your client with the RFP Process
(4) Disaster Planning – What to do when your current
plan audit is not going well
(3) Best Practices for navigating the plan audit process.

6. • Basic Requirement – Employee Benefit Plans with over 100
participants at the beginning of the year are required to obtain
an Independent Public Accountant (IPA) to provide an audit.
• Exceptions:
80/120 Rule
Short Plan Year (Seven Months)
• Audit requirement for start up plans – If there are 100
participants (at Inception)
.
201
Current Audit Regulations - General
6

7. • Basic 403(b) Audit Requirement – The Department of Labor’s
2007 notice regarding the elimination of the exemption for
403(b) retirement plans becomes effective in 2009.
• Title I of ERISA does not however apply to Governmental Plans
(Defined under ERISA 3(32) or Church Plans (Defined under
ERISA 3(33)
.
Current Audit Regulations – 403(b)
7AICPA EBPAQC Publication - Section 403(b) Retirement Plans Form 5500 Reporting and
Independent Audit Requirement (2013)

8. Current ERISA Plan Audit Population
8
83,000
PLANS THAT
REQUIRE AN AUDIT
$6.7 Trillion
IN PLAN ASSETS SUBJECT TO AUDIT
8,000
CPA FIRMS
PERFORMING
EBP AUDITS
AICPA EBPAQC Webinar - EBPAQC Designated Partner 2014
Audit Planning)

9. Current ERISA Plan Auditor Breakout
9
1% of Plan Auditors:
• Audit 100 or more Plans
• Audit 42% of all Audited Plans
• ~35,000 Plans
• Aggregate 91 Million
Participants
50% of Plan Audit Firms
• Audit 1 or 2 Plans
• Audit 6% of all Audited Plans
• ~5,000 Plans
• Aggregate 2 Million
Participants
Both ends of the Audit Spectrum
AICPA EBPAQC Webinar - EBPAQC Designated Partner 2014 Audit Planning)

10. 10
Organizations and Oversight Responsibilities
PUBLIC COMPANY
ACCOUNTING
OVERSIGHT BOARD
• Responsibility for 11-K
filers
• Determined if a Public
Company issuer has
Company Stock in the
Plan
• PCAOB Standards and
Language
Requirements differ
from AICPA/DOL
requirements
DEPARTMENT OF
LABOR/EBSA
• Responsible for the
enforcement of Title I
of ERISA
• Performs reviews of
Auditor workpapers to
ensure compliance
• Refers noncompliant
auditors to AICPA or
State Boards
AMERICAN INSTITUTE
OF CERTIFIED PUBLIC
ACCOUNTANTS
• American Institute of
Certified Public
Accountants
• Established in 1887
• Largest accounting
association with 400,000
members in 145
countries..
AICPA - EMPLOYEE
BENEFIT PLAN AUDIT
QUALITY CENTER
• Established to promote
the quality of employee
benefit plan audits
• Regulatory updates
and continuing
professional education
• Provide Guidance on
Audit Best practices for
Employee Benefit Plan
audit personnel

11. ERISA Advisory Council
STATE BOARDS OF
ACCOUNTANCY
Public Company
Accounting Oversight
Board
• Both individual CPA
certificates and firm
licensure are through
the various state’s
board of accountancy
11
Organizations and Oversight Responsibilities
ERISA ADVISORY
COUNCIL
• Established by Section
512 of ERISA
• Fifteen member
advisory council who’s
duties are to submit
recommendations to
the Secretary of Labor
• Appointed by the
Secretary of Labor
DEPARTMENT OF
LABOR - OIG
Office of Inspector General
• Conducts audits to
review the effectiveness
and efficiency of all DOL
Program
• Programs are in
compliance with law and
regulations
INTERNAL REVENUE
SERVICE
• Enforcement of ERISA
title II provisions including
tax qualification
requirements
• Employee Plan
Examination
• Significantly less
interaction with
Independent Public
Accounting Audit Firms
than EBSA/DOL

12. Historically audit quality has often been overlooked
Often viewed as a commodity and regulatory necessity
A skilled auditor can often assist with locating compliance issues, some
that may jeopardize a plan’s qualified status and assist in remedying
them prior to compounding into larger issues.
12

13. Implications of a Substandard Audit
Mechanics of a Substandard Audit: Typically performed through the Department of Labor work
paper reviews conducted at regular intervals and as part of the 2014 Audit Quality Study. If
work is deemed to be substandard after conducting the review of the Auditor’s workpaper the
following actions may occur depending on the nature of the issues:
1) The auditor is referred to the AICPA or Respective Board of Accountancy
2) The Form 5500 and associated Substandard audit may be removed from EFAST.
A letter is issued issued allowing for a 45 day cure period
The plan sponsor must then have that year cured or reaudited
If the plan sponsor does not cure the deficiency a notice of intent to assess penalty is
sent
The plan sponsor may be subject to late penalties based upon the original filing deadline
13Interview – Marcus Aron, DOL SR. Investigator (2015))

14. Implications of a Substandard Audit
Next steps: Department of Labor work paper reviews conducted at regular ongoing intervals.
Large samples are conducted for quality studies less frequently.
14
Possible Consequences (Plan Sponsor): The plan sponsor may be subject to the same
penalties as if the Form 5500 was never filed. The Department of Labor can assess civil
penalties up to $1,100 per day with no maximum.
Possible Consequences(Plan Auditor): Referral to the applicable state board of accountancy
and or AICPA Professional Ethics Committee.
Interview – Marcus Aron, DOL SR. Investigator (2015)

15. The meaning of a Substandard Audit
15
A substandard audit Does NOT equal A PLAN WITH COMPLIANCE
ISSUES
A substandard audit Equals DEFICIENT WORKPAPERS/BAD AUDITOR

16. EBP Audit Quality Studies - History
16
1997 & 2004
Of employee benefit plans
failed to comply with one or
more established
professional standards
Of IQPA reports on
employee benefit plans did
not meet the reporting and
disclosure requirements of
ERISA and the regulations
there under
19%
33%
2014
39%
Deficiency rate
400
Number of Audit firms
included in the stratified
Sample
Firms stratified by the
number of EBP audits
1989
Of employee benefit plans
failed to comply with one or
more established
professional standards
Of IQPA reports on
employee benefit plans did
not meet the reporting and
disclosure requirements of
ERISA and the regulations
there under
23%
65%
2004
“Employee Benefits Security
Administration: EBSA Needs
Additional Authority to Improve
Quality of Employee Benefit Plan
Audits(#09-04-005-12-12),
September 2004”
Report highlights the need
for EBSA to have direct
authority over auditors who
perform plan audits.
Can only work indirectly by
referring problem firms and
removing form 5500 filings
with substandard audits
2012
The report has a series of
findings - main
recommendations
(1) Use existing authority to
clarify and strengthen
limited scope audit
regulation(2) Make better
use of available
enforcement tools over
IQPAs (3) Improve
procedures in audit quality
reviews (4) Perform a
reassessment of audit
quality
RECOMMENDATIONS

17. Prelude to the most recent Audit Quality Study
The Department of Labor – Office of the Inspector General September 28, 2012 Report
17
The Department of Labor - OIG Conducted a report to determine if EBSA’s oversight of ERISA audits had improved audit
quality and increased participant protections.
Title: Changes are still needed in the ERISA audit process to Increase Protections for Employee Benefit Plan Participants.
Strong lead in with: “Despite EBSA’s significant efforts to improve oversight and audit quality, protections and assurances
have decreased over time for participants and beneficiaries.”
EBSA’s efforts to improve oversight and audit quality through working with AICPA, to provide guidance and education,
redesigning its targeting methods to correct substandard audits and auditor outreach and training. EBSA’s efforts have been
offset by plan administrators’ increased use of the limited scope audit.
The percentage of plans electing limited scope audits has grown from 46 percent in 1987 to 70 percent through 2010.

18. Prelude to the most recent Audit Quality Study
The Department of Labor – Office of the Inspector General September 28, 2012 Report (Continued)
18
MAJOR REPORT POINTS AND FINDINGS:
• The use of limited Scope audits is a MAJOR obstacle in providing audit protections for participants and beneficiaries.
• EBSA Lacks Legal Authority in Monitoring and Enforcement against Independent Qualified Public Accountants
• EBSA can only refer IQPA’s to AICPA and state Boards
• EBSA can remove form 5500 filings with substandard audits attached
• EBSA’s IQPA workfile reviews did not always sufficiently documented that the file met professional standards
(the auditors of the auditors of the auditors workpaper were not satisfied in all cases)
• EBSA needs to reassess overall employee benefit plan audit quality (has not been done since 2004)
AICPA EBPAQC Webinar - EBPAQC Designated Partner 2015 Audit Planning)

19. Most Recent Audit Quality Study
Department of Labor Strata Determination
The Department of Labor, undertook a statistical study of IQPA audits for the 2011 filing period. The quality review was
undertaken throughout the 2014 calendar year. Approximately 400 files were reviewed and firms were divided into 6 strata to
provide more meaningful data extrapolation of audit results.
19
FIRMS THAT AUDIT
750 + Plans.
100-749 Plans.
25-99 Plans.
6-24 Plans.
3-5 Plans.
1-2 Plans.
AICPA EBPAQC Webinar - EBPAQC Designated Partner 2015 Audit Planning)

20. Most Recent Audit Quality Study - Results
The Department of Labor, Audit Review Findings
20
• Direct Correlation between the Size of a Firms Employee Benefit Plan Practice and
Deficiencies
• Nearly 76% of Audit firms in the first Strata (those that performed 1-2 audits annually)
were deficient
• First strata firms were deficient in 5 or more areas and had overall uniformly higher
levels of deficiency in all audit areas
AICPA EBPAQC Webinar - EBPAQC Designated Partner 2015 Audit Planning)

21. Most Recent Audit Quality Study - Results
The Department of Labor, Audit Review Findings (Continued)
21
• AICPA - EBAPAC member firms performed higher quality work
• NO Correlation between audit fee and audit quality!
• Problematic audit areas continue to be the same specified areas as previously
identified
AICPA EBPAQC Webinar - EBPAQC Designated Partner 2015 Audit Planning)

22. Common Audit Deficiencies - DOL
Deficiencies found in the 2014 Audit Quality Study were mostly the same ones noted in prior reviews and audit
quality studies.
TESTING OF PAYROLL DATA WAS INSUFFICIENT
NO TESTING OF PARTICIPANT ELIGIBILITY OR
FORFEITURES
INADEQUATE OR MISSING DISCLOSURES
FAILURE TO OBTAIN PROPER CERTIFICATION
FOR LIMITED SCOPE AUDIT PROCEDURES
TIMELINESS OF PARTICIPANT CONTRIBUTIONS
NOT TESTED
DOCUMENTATION OF TESTING INTERNAL
CONTROLS FOR PAYROLL
Common Deficiencies Listed in the Study
22

23. Most Recent Audit Quality Study - Results
The Department of Labor, 2014 Audit Review Results
23
• 131 referrals to the AICPA
• 13 referrals to the State Board of Accountancy
• 90% of firms in the 6-99 strata’s who performed deficient EBP audits received clean
opinions in there peer review reports
AICPA EBPAQC Webinar - EBPAQC Designated Partner 2015 Audit Planning)

24. Most Recent Audit Quality Study – Follow Up
The Department of Labor, 2014 Audit Review Follow Up Interview with Marcus Aron, DOL
senior auditor
24
• March 2, 2015 Interview of Sr. Investigator Marcus Aron of the Department of Labor as
a follow up to the 2014 quality study
• The study has lead to “enhanced targeting” by helping to identify the highest problem
areas
• Furthering initiatives of educating plan auditors, working with NASBA to ensure
auditors are properly licensed and directed enforcement efforts
• It will be challenging to improve quality until the strata of firms that audit 1-2 plans can
be addressed

25. Future EBSA initiatives that impact plan audits
1,000
Plans
Filed Last Year
Without the
necessary audit
attached to the
filing..
25
Asking for Fidelity
Bond Copies and
following up on
Form 5500 filings
with no coverage
denoted
DOL is working
with the National
Association of
State Boards of
Accountancy to
check EBP auditor
licensing status
The Department
performs word
searches to
locate filings
with auditors
who have not
updated reports
to the new
clarified
standards
The Department
has in most
instances
contacted the
plan sponsor or
will do so in the
near future…….
DOCUMENT
RETENTION
Plan Sponsors
required to retain
documentation to
substantiate
compliance
(Hardship
distributions &
participant loans
AICPA EBPAQC Webinar - EBPAQC Designated Partner 2015 Audit Planning)

26. Future EBSA initiatives that impact plan audits
EBSA
Outreach
Continue work with the
AICPA EBPAQC and
auditors to improve
quality
26
Placing enhanced focus
on working with plan
sponsors to educate and
improve audit quality

27. DOL’s Peer Review Project
The Department has requested enrollment status of 4,918 Firms
Peer Review Information System Manager (PRISM) records were cross listed with Form
5500 filing information and other DOL records
Approximately 500 firms failed to properly identify completion of EBP audit (145 Peer
Review Reports Recalled)
Approximately 1000 open investigations as of July, 2014 report by AICPA
272014 AICPA Peer Review Conference -Employee Benefit Plan Segment

28. Aggregate DOL-EBSA Referrals
AICPA Ethics Division
28
• Approximately 800 referrals from EBSA
• EBSA receives status updates on referrals
State Boards of Public Accountancy
• Over 100 referrals from EBSA to various state boards of
accountancy
• Resources vary widely among states to handle referrals
2014 AICPA Peer Review Conference -Employee Benefit Plan Segment

29. Quality Audit Inputs
6. Quality EBP Audit
5. Experienced Partner & Staff
1. PROPERLY LICENSED
2. Seasoned Attest Practice
3. EBP Specific Knowledge4. Committed to Continuing Education
29

30. Starting the Due Diligence Process
IMPORTANT
QUESTIONS THAT
YOU NEED TO
MAKE SURE
YOUR CLIENT IS
ASKING OF
PROSPECTIVE
PLAN AUDITORS
30
ARE YOU LICENSED?
ARE YOU LICENSED IN OUR STATE?
ARE YOU AICPA EMPLOYEE BENEFIT PLAN AUDIT QUALITY
CENTER MEMBERS?
WHAT ARE THE NUMBER OF CPE HOURS RELATED TO EBP
MATTERS THAT YOU TAKE IN A YEAR?
WHAT ARE THE NUMBER OF EBP AUDITS YOUR FIRM
CONDUCTS A YEAR?

31. Due diligence process – Are you licensed?
IMPORTANT
QUESTIONS THAT
YOU NEED TO
MAKE SURE
YOUR CLIENT IS
ASKING OF
PROSPECTIVE
PLAN AUDITORS
31
Both Firms and Individuals are licensed through the respective
state board of accountancy
National Association of State Boards of Accountancy (NASBA)
http://nasba.org/stateboards/
• Navigate through an individual state board website to check both
partner and firm licensure

32. Due diligence process – Are you licensed?
IMPORTANT
QUESTIONS THAT
YOU NEED TO
MAKE SURE
YOUR CLIENT IS
ASKING OF
PROSPECTIVE
PLAN AUDITORS
32
www.cpaverify.org
Aggregates participating states CPA and firm licensure data

33. Due diligence process – Are you an AICPA
EBP Audit Quality Center Member?
IMPORTANT
QUESTIONS THAT
YOU NEED TO
MAKE SURE
YOUR CLIENT IS
ASKING OF
PROSPECTIVE
PLAN AUDITORS
33
www.cpamobility.org
Review for applicability of out of state licensing on your home state

34. Due diligence process – Is our state a
mobility state for licensing?
34
http://www.aicpa.org/InterestAreas/EmployeeBenefitPlanAudit
Quality/Pages/EBPAQhomepage.aspx
Review for listing of firm with with EBPAQC
IMPORTANT
QUESTIONS THAT
YOU NEED TO
MAKE SURE
YOUR CLIENT IS
ASKING OF
PROSPECTIVE
PLAN AUDITORS

35. Due diligence process – Importance of EBP
specific CPE
35
Assists in the ascertaining the level of knowledge of key firm EBP
personnel.
• No national database
• Will need to ask regarding amounts and types of EBP Specific
Continuing Professional Education (CPE) taken
• Base CPE needed by type for CPA renewals with the State Board
of Accountancy
• No EBP Specific CPE is required by the state boards
• AICPA Employee Benefit Plan Audit Quality Center only requires 8
credits only for partners
IMPORTANT
QUESTIONS THAT
YOU NEED TO
MAKE SURE
YOUR CLIENT IS
ASKING OF
PROSPECTIVE
PLAN AUDITORS

36. Due diligence process – Number of EBP
audits that your firm performs
36
Full RFP Evaluation
Annual firm questionnaire (abbreviated for current auditor)
Outside review/reconciliation of CPA firm data
Larkspur (www.larkspurdata.com)
• Planisphere
• Datamaster Pro
Other services available for EFAST aggregate data
IMPORTANT
QUESTIONS THAT
YOU NEED TO
MAKE SURE
YOUR CLIENT IS
ASKING OF
PROSPECTIVE
PLAN AUDITORS

37. DOL Publication
37

38. DOL Publication (Summary)
38
Why is the choice of an auditor important?
• Legal responsibility to file a complete and accurate annual
report each year
• An incomplete, inadequate or untimely audit report may result
in penalties being assessed against you as the plan’s
administrator

39. DOL Publication (Summary)
39
Other topics
• The importance of a firm’s EBP experience
• Importance of requesting references and checking necessary licenses
• Questions to ask the auditor about their work
• Were contributions to the plan timely received?
• Were benefit payments made in accordance with plan terms?
• Were any issues identified that may impact the plan’s tax status?
• Were transactions prohibited under ERISA properly identified?

40. AICPA – Employee Benefit Plan Audit Quality
Center (EBPAQC)
40
Center founded in 2003 to serve accounting professionals who specialize in
employee benefit plan services including attest work
• EAlerts
• Plan Advisories
• Primers
• Webinars
• Member to member Forum
• Resource Centers

41. 15,045
AUDITS
(18%)
2011 Plan Year - Filing Statistics - EBPAQC
2014 Designated Partner EBP Webinar
Audits
Performed by
EBPAQC Firms
Audits
Performed by
NON-EBPAQC
Firms
67,533AUDITS
(82%)
41
2,310 Firms 5,048 Firms

42. AICPA – EBPAQC
42AICPA EBPAQC – Designated Partner Audit Planning Webinar 2-24-15

43. AICPA Publication
43

44. AICPA Publication (Summary)
AICPA – The importance of hiring a Quality Auditor 44
If your employee benefit plan is required to have an audit, one of your most
important duties is to hire an independent qualified public accountant, and to
ensure that the plan has obtained a quality audit in accordance with ERISA and
U.S. Department of Labor (DOL) requirements.
The Importance of hiring a Quality Auditor to perform your Employee Benefit Plan
Audit - AICPA

45. AICPA Publication (Summary)
45
The Advisory provides guidance on:
• Describes why a financial statement audit is important
• Risks to plan sponsors if a quality audit is not performed
• Evaluating auditor qualifications
• The proposal process, including the request for proposals
• Proposal evaluation and auditor selection
• Documenting the agreement
AICPA – The importance of hiring a Quality Auditor

46. AICPA Publication (Summary)
46
According to the AICPA why is a quality audit so important?
• Because an incomplete, inadequate or untimely audit report may result in a
rejection of your filing and penalties being assessed against you as the plan
administrator, selection of an experienced and reliable auditor is very
important.
• While ERISA requires plan fiduciaries to ensure that only
“reasonable”compensation is paid for services when selecting an auditor,
thereasonableness of fees must be analyzed in comparison with the quality
ofthe required services to be provided.
PUT COST ASIDE IN THE PROPOSAL PROCESS UNTIL YOU HAVE
ENSURED THAT ALL CANDIDATES ARE QUALIFIED.
AICPA – The importance of hiring a Quality Auditor

47. Perceptual map – Possible Opposing Goals
Fiduciary Responsibility 408(b)2 / Price –
ERISA’s intent to protect plan participants
with a quality audit engagement.
Possible Opposing Goals
47
Plan fiduciaries responsibility
to ensure that service providers
are paid only “reasonable”
compensation
Hiring a firm that lacks the
knowledge necessary to properly
perform plan audits conflicts
with ERISA’s stated intent to
protect plan participants

48. AICPA base categories of evaluating audit firms
48AICPA – The importance of hiring a Quality Auditor
EXPERIENCE AND PROFESSIONAL DEVELOPMENT
IDENTIFYING QUALITY AUDIT FIRMS
LICENSING
INDEPENDENCE
AICPA – BASIS FOR EVALUATION OF AUDIT FIRMS

49. Steps to help Locate a Quality Plan Auditor
Provide DOL and AICPA
Publications
OPTION ONE
Maintain a list of Qualified
Plan Auditors you have
already vetted and worked
with
OPTION TWO
Attend Meetings with Plan
Sponsor Personnel to help
vet Audit Firms
OPTION FOUR
OPTION THREE
Provide templates for Plan
Sponsors to send out
Requests for Proposal
49

50. (1) Transmitting DOL and AICPA publications
POSITIVES POSSIBLE DOWNSIDE
Provides detailed guidance
Does not take a significant time
commitment to supply
Drafted by key stakeholders and
provides expert unbiased guidance
Some clients may need additional
guidance or interpretation of the guides
Clients may not effectively apply
guidance and may end up with an
unqualified auditor
50
Shows a high level of service and care to
the client

51. (2) Maintaining a list of qualified audit firms
51
(A) Building a list of qualified audit firms
• Firms that you already work with and know may be a good place to start
building the list
• Research firms you will be recommending as you want to ensure to the
greatest degree possible that you are recommending a quality firm
• Compile listing for when clients become audit eligible or are looking to go out
for the RFP process

52. (2) Maintaining a list of qualified audit firms
52
(B) Vetting Prospective
Additions to the List
Gathering
additional data
that has a proven
correlation with
quality and
possible
deficiency rates

53. (2) Maintaining a list of qualified audit firms
POSITIVES POSSIBLE DOWNSIDE
A more significant time commitmentMost influential of strategies
Highest probability to ensure working
with a quality auditor
More responsibility for the outcome of
the audit and the client’s satisfaction with
the audit firm
53
May help reduce multiple points of
contacts and deal with a smaller number
of firms with quality EBP practices

54. (3) Providing a RFP Template
54

55. (3) Providing a RFP Template
POSITIVES POSSIBLE DOWNSIDE
Help ensure that you are working with
competent professionals
Helping your client to ensure they are
asking the correct information to make
an educated decision
You may have to field additional
questions about the document or help
interpret the incoming proposals
55
Can be used in conjunction with other
methods of assistance

56. (4) Attend meetings with plan sponsor and
perspective audit firms
POSITIVES POSSIBLE DOWNSIDE
Help to drive the audit selection
process and get comfortable with who
you will be working with
Helping your client to ensure they are
asking the correct information to make
an educated decision
TIME
56
Can be used in conjunction with other
methods of assistance

57. Firm Quality Map
HIGH PRICE, HIGH QUALITYHIGH PRICE, LOW QUALITY
LOW PRICE, HIGH QUALITYLOW PRICE, LOW QUALITY
57
No meaningful
correlation
between audit
fees and
the quality of
audit work
IAN DINGWALL
Chief Accountant
DOL
REGIONAL FIRMS WITHOUT
EBP AUDIT SPECIALTY
HIGH PRICED LOCAL FIRM
WITH OUT SIGNIFICANT EBP
EXPERIENCE
SOLE PROPRIETOR WITH
LIMITED EBP EXP
LOCAL FIRM WITHOUT
SIGNIFICANT EBP AUDIT
EXPERIENCE
SELECT REGIONAL
FIRMS
NATIONAL FIRMS
SOLE PROPRIETOR WITH
A TOTAL EBP FOCUS
LOCAL FIRM WITH
SIGNIFICANT EBP AUDIT
EXPERIENCE

58. Audit Quality Defined – Depends on stakeholder
PEER REVIEW
GENERALLY
ACCEPTED
AUDIT
STANDARDS
AUDIT FIRM
EASY TO WORK
WITH
DOES NOT
GENERATE
ABOVE
AVERAGE
COMPLIANCE
TIME
CREATES A
QUALITY
PRODUCT THAT
MEETS
COMPLIANCE
OBJECTIVES
PLAN SVC.
PROVIDERS
58
PLAN
SPONSOR
CONVENIENCE
PRICE
EASE OF USE
DOES NOT
CREATE A
FUTURE ISSUE
REVIEWS PLAN
OPERATIONS
PROPER
ALLOCATION OF
INVESTMENT
INCOME AND
PLAN EXPENSES
TO PARTICIPANT
ACCOUNTS
MEET ANNUAL
COMPLIANCE
REQUIREMENTS
TO CONTINUE
OPERATION OF
PLAN
PLAN
PARTICIPANT
EBSA
FULL
PARTICIPANT
PROTECTIONS
AS ENVISIONED
BY ERISA’S
INTENT TO HAVE
LARGE PLANS
SUBJECT TO A
QUALITY AUDIT.

59. Audit Quality Defined
59
Why is a quality audit so important:
• At the base level audit quality is representative of a set of work papers, report
and a defined process and work product free of deficiencies that will stand up
to regulatory scrutiny.
• Other important benefits of an audit:
• Helping the plan sponsor become IRS and DOL audit ready and minimize the
likelihood of any possible penalties resulting from an audit by either agency.
• An additional resource and point of review for plan operations.
• ACTUAL EXAMPLES (prevention of prohibited transactions, Form 5500
corrections, miscalculation of forfeitures, VFCP assistance)

60. An inside look at the audit process
+Audit
processes
can be
highly
variable,
even
across
quality firms.
60

61. Sample Audit Process
Sample audit process and walk through
CONDUCTING
THE AUDIT/
AUDIT TESTING
PLANNING REVIEW &
ISSUANCE
61

62. Audit Process
PREAUDIT PLANNING
62
• Engagement Letter, Online Access, Gathering plan background data, documenting internal controls.
.
Best Practice in the Preaudit Planning Stages
(1) Help coordinate the communication process between the other plan service providers and clients
(2) Setting up direct online auditor access where available
(3) Clearly communicate issuance preferences and key date expectations

63. Audit Process
INITIAL AUDIT STAGES
63
• Gather initial audit data
• Reconcile transactional class detail to investment statements, participant statements and aggregate plan
reporting
• Perform initial analytical procedures on account balance interrelations
Best Practices in the Audit Planning Stages
(1)Make sure necessary data is available and assist in removing obstacles when possible

64. Audit Process – Best Practices
MAKE WORK VISIBLE WHEN POSSIBLE AND SET EXPECTATIONS
64

65. Visual Audit Progression
65
SELECTION
RECONCILIATION AND
ALLOCATION TESTING
EMPLOYEE FILE, PAYROLL
ENROLLMENT FORMS
TRUSTEE REPORTING
PAYROLL DATA, W2 TOTALS
SCHEDULES,
PROMISSORY NOTES, CHECKS
1099-R, REQUESTS,
CHECKS
408(B)2 DISCLOSURES,
5500 SCHEDULE C
FORM 5500
TRIAL
BALANCE
FINANCIAL
STATEMENTS
ACCRUALS
INVESTMENT
SCHEDULE
CONTRIBUTION
SCHEDULE
DISTRIBUTION
SCHEDULE
LOAN
SCHEDULE
FEE
SCHEDULE
PARTICIPANT
DATA SAMPLE
CONTRIBUTION
TEST SAMPLE
DISTRIBUTION
SAMPLE
PARTICIPANT ACCOUNT
STATEMENTS
LOAN TESTING
SAMPLE
SERVICE PROVIDER
CONTRACTS

66. Audit Process
FIELDWORK TRANSACTIONAL TESTING
66
PROCEDURES
• Plan Level: Reconcile cash basis reporting to accrual/payroll basis, review and test individual transaction
classes
• Participant Level: Agree aggregate participant level reporting to plan reporting, select samples and test
all major transaction classes
Best Practices in the Fieldwork Stages
(1) If possible transmit documentation on the request list that you have access to.

67. Audit Process
TESTING – COMPLIANCE TESTING/ERISA SUPPLEMENT
67
PROCEDURES
Plan Level:
• Agree and test completeness and accuracy of compliance/discrimination testing and the maintenance of
proper bond coverage throughout the year.
• Fiduciary responsibilities revolving around investment selection, transmission of participant disclosures,
and evaluation of plan service provider compensation are being satisfied.
• Parties-In-Interest procedures
• Additional fraud procedures are completed.
.

68. Audit Process
REVIEW OF WORKPAPERS, REPORT AND FORM 5500
68
PROCEDURES
• Review all audit work to ensure, it is properly documented and meets all professional standards (3+
levels of review)
• Review Draft Report (4 levels of review), technical accuracy, wording, financial statement notes
• Review Draft Form 5500 (Reconcile Schedule H, review for completeness and accuracy)
• Check for Schedule C, Part III completed for switching auditors (if applicable)
• Schedule H auditor information is correctly completed with proper report type

69. Audit Process
POST AUDIT
69
PROCEDURES
• Communicate any deficiencies or areas of possible improvement to management and administrative
committee members
• Review EFAST filing to ensure (1) it properly posted (2) it has all the proper schedules and attachments
including the audit
Best Practices in the Wrap up Stages
* Review the submission of the Form 5500 and audit report were completed prior to
the deadline and posted with all applicable attachments including the audit report.
* Does not count unless it is filed *

70. Audit Process
BEING STUCK IN THE MIDDLE OF AN INEFFICIENT PLAN AUDIT CAN FEEL LIKE……
70

71. Disaster Planning
TIPS FOR WHAT TO DO WHEN AN AUDIT IS GOING POORLY
71
• Establish expected dates of completion early in the process and
milestone dates to track progress throughout the audit process and
see when the process is falling behind
• Be present at the preaudit planning meeting or if the firm does not
usually have a preaudit planning meeting with the client ask for one
or at lease a conference call
• Insist upon getting a copy of the full listing of all data requests as
soon as possible in the audit process, ideally before the audit starts.
• Ask other plan auditors about potential issues regarding plan audits
and guidance on quality issues.

72. Disaster Planning (Continued)
TIPS FOR WHAT TO DO WHEN AN AUDIT IS GOING POORLY
72
• Easier to invoke action when you have agreed upon target dates and
have fallen behind milestone dates
• Document communications in an email, so you can forward reply's
with anticipated completion dates and instill a greater sense of
responsibility for meeting the dates
• Working with a quality firm will reduce or eliminate much of the need
for an overly hands on approach at the financial advisor role

73. Audit outcomes
73
Easier to predict end outcome
when you have all the
opportunity to assist in
gathering the qualitative
information to select a
qualified audit firm

74. Resources
CPA MOBILITY WWW.CPAMOBILITY.ORG
74
CPA LICENSE VERIFICATION WWW.CPAVERIFY.ORG
NATIONAL ASSOCIATION OF STATE BOARDS OF ACCOUNTANCY WWW.NASBA.ORG
AICPA EMPLOYEE BENEFIT PLAN AUDIT QUALITY CENTER
www.http://www.aicpa.org/InterestAreas/EmployeeBenefitPlanAuditQuality/Pages/EBPAQhomepage.aspx.org

75. Downloads
DOL PUBLICATION: SELECTING AN AUDITOR FOR YOUR EMPLOYEE BENEFIT PLAN
www.Metzcpa.com/files/DOLPublication.pdf
75
AICPA PUBLICATION: IMPORTANCE OF HIRING A QUALITY AUDITOR
www.metzcpa.com/files/AICPAimportanceofhiringaqualityauditor.pdf
ANNUAL AUDITOR QUESTIONNAIRE
www.metzcpa.com/files/AnnualAuditorQuestionnaire.docx
PLEASE NOTE: WEB DOWNLOADS ARE CASE SENSITIVE
DOL PUBLICATION: ASSESSING THE QUALITY OF EMPLOYEE BENEFIT PLAN AUDITS
www.metzcpa.com/files/DepartmentofLaborAuditQualityStudy-May2015.pdf
SAMPLE AUDIT RFP DOCUMENT
www.metzcpa.com/files/Requestforproposal-AuditFirm.docx

76. In summary: Help protect your clients
• Realizing the increasing importance of the often overlooked
fiduciary aspects of hiring a plan auditor.
• Don’t let your valued clients risk the possibility of fines and
penalties related to substandard work that is more prevalent
than most outside the audit process would anticipate.
76

77. Our contact Information
9201 25th Avenue, Suite 170
Phoenix, Arizona 85021
METZ & ASSOCIATES PLLC
CALL US
TRAVIS P. JACK, CPA, QKA
480-878-7346
E-MAIL
tjack@metzcpa.com
CALL US
REBECCA BRADAC, CPA
480-878-7347
E-MAIL
rbradac@metzcpa.com
77

78. QUESTION &
ANSWER