Employee Benefit Plan Audits

What Is An Employee Benefit Plan Audit and What to Expect?

Are you wondering if your company has to prepare for an employee benefit plan audit?

If a company provides an employee benefit plan (EBP) to more than 100 eligible employees, the plan would be subject to an EBP audit required by the Department of Labor. Most companies, when facing an EBP audit, will engage a CPA who is specifically trained to complete this particular task.

In the event of an EBP audit, each element of a company’s employee benefits package will be scrutinized. The company will want to ensure they’ve assembled a detailed and communicative audit team ready to conquer such a task. The team will aid the hired auditor by providing and organizing the necessary information and documents needed during the audit.

The flow of an audit is different for every business but should be outlined as follows:

1. Planning and supervision
○ Strategize with the audit team.

2. Risk assessment
○ Auditors will assess the risk areas of your plan that will require special scrutiny.

3. Internal controls
○ An auditor will inspect how the internal organization of the services takes place and evaluate the effectiveness of the process. Based on the effectiveness of the internal control process, the auditor will then determine the appropriate level of testing needed.

4. Audit testing
○ Testing allows for the auditor to choose between two alternatives.

○ Substantive analytical procedures and/or substantive test of details of account balances, classes of transactions and disclosures. Based on the assessment of internal controls, the auditor will decide on the appropriate method.

5. Evaluation
○ After evaluating the evidence. the auditor will then form an audit opinion that aligns with basic guidelines and requirements.

○ An auditor can only give their opinion until they are sure there are no material misstatements.

6. Reporting
○ An audit report will be issued for the plan which is used to be filed with the DOL.

What’s the difference between Full Scope and Limited Scope Audits?

The basic difference between a full-scope audit and a limited scope audit is the extent of internal control assessment and testing surrounding the investments held in the plan. A full-scope audit requires the auditor to test the investment balances at year-end, purchases and sales of investments during the year under audit, and internal control understanding and assessment of the investments held by the plan. A limited scope audit allows the auditor to basically not perform the previously mentioned steps as long as the investments are certified by the custodian as being complete and accurate.

Limited Scope Audits vs Full Scope Audits


Some tips to make your audit operate efficient and effective:

-Have one point of contact to relay information between teams
-Know your policies and procedures and any changes therein
-Know your plan’s investments
-Have documents and requested information ready
-Allow on-line access for the auditor to the custodian’s website

The main thing to remember during any employee benefit audit is to communicate, coordinate, and organize. Good preparation may lead to opportunities to streamline and save engagement fees.

Atherton & Associates, LLP

One of our firm’s largest audit niches is in the area of employee benefit plans. Our clients range from plans with only a few hundred eligible participant accounts and 400 thousand in net assets to those with 10,000 plus eligible participants and more than 340 million in net assets.

Atherton has been a member of the AICPA Employee Benefit Plan Audit Quality Center since 2008. Our firm stays up to date on all the hot topics that are affecting employee benefit plans so that we are always one step ahead in ensuring your plan is in compliance with ERISA reporting requirements and the regulations required by the Department of Labor (DOL).

Your plan would benefit from our risk-based audit approach as well as the timely and effective communication and coordination. With appropriate cooperation from the record-keeper and plan sponsor, we are committed to meeting the July 31st deadline to avoid an extension of time to file.