If you’re preparing for a first-time audit of your organization’s employee benefit plan, choosing a quality auditor is an important step in the process. However, the task can be daunting if you’ve never had to hire an auditor for your plan. You may have some important questions, such as where to find an auditor and how to select one based on their qualifications – here, we provide some answers to some of these critical questions.
How and where do I find an auditor for our plan?
Before you prepare and distribute a request for proposal (RFP) to audit your organization’s benefit plan, it’s important to first identify a list of quality auditors with plan audit experience. There are a couple of ways to go about procuring a list of potential auditors:
- If you already have a trusted advisor for other accounting and advisory needs, ask your provider for references of plan auditors who may be a good fit for auditing your organization’s benefit plan.
- The American Institute of Certified Public Accountants (AICPA) has established the Employee Benefit Plan Audit Quality Center (EBPAQC), which is a voluntary membership center for firms that conduct benefit plan audits. Members are required to demonstrate higher standards of audit quality, and the EBPAQC provides a searchable database of member firms, allowing you to identify candidates who can perform such an audit.
What are the most important qualifications of a potential plan auditor?
While some may assume that a firm’s size indicates a quality potential auditor, the reality is that a firm’s size matters little compared to how many plan audits they have conducted successfully. In fact, the Department of Labor (DOL) has found that the number of audits conducted by a firm directly correlates to their error during the actual audit – in other words, the lower the number of plan audits performed, the higher the potential deficiency rate of the audit. Regardless of a firm’s size, its commitment to audit quality is an essential characteristic. Consider the following qualifications as you choose an auditor for your benefit plan:
- The auditor should have relevant experience in your organization’s industry (healthcare, manufacturing, construction, etc.).
- The auditor should be able to establish independence and follow the rules of auditor independence as laid out by the AICPA.
- The auditor should meet all licensing requirements for the state in which they practice.
- The auditor should be able and willing to provide its most recent peer review report, which is required by the AICPA Peer Review Program.
- The auditor should be able to provide quality, robust references of previous audits of employee benefit plans.
How do I actually select an auditor?
If you decide to distribute an RFP to a list of potential auditors, your RFP should include an introduction to the nature and scope of the work required (in this instance, an employee benefit plan audit) and a description of your organization as it relates to the requested work. Additionally, your RFP should provide a list of requested responses to carefully selected questions, which will help you determine the unique qualifying aspects of each firm that provides a proposal. Finally, the RFP should provide a timeline for the auditor selection process and key contact information should potential firms have any additional questions.
A comprehensive RFP can be the first step in your auditor selection process. However, if you’ve been referred to a firm through your advisor, you can schedule a meeting to gather all the necessary information regarding the plan audit, which may be enough for the firm to prepare a proposal. The proposal should therefore help you determine your final decision.
As you receive proposals for the plan audit, you should evaluate their response based on the following key criteria:
- Did the firm address all items requested in your RFP? Have they met the minimum standards for a response?
- Are they able to clearly show their required independence, state licensure, most recent peer review and professional experience?
- Are their proposed costs of the work to be performed in alignment with your organization?
Depending upon how many proposals you receive in response to your RFP, you may wish to narrow down your selection to a few finalists and provide the option to give an oral presentation of their proposal. This provides an opportunity for potential auditors to demonstrate their insight into your industry and the scope of the engagement, as well as a chance for you to clarify certain responses or ask other important questions (although you should remember to refrain from discussing any proprietary information submitted by other firms).
Windham Brannon understands that choosing a benefit plan auditor for the first time can seem like a daunting task. For questions or more information, reach out to your Windham Brannon advisor, or contact Anne Morris.