At Sweeney Conrad, we understand the importance of conducting thorough audits for employee benefit plans (EBPs). Recently, the Department of Labor (DOL) released the final results of its Audit Quality Study for the 2020 filing year. The findings provide valuable insights that can help improve the quality of EBP audits. Here are some key lessons and takeaways from the DOL study, along with how Sweeney Conrad already addresses these issues to ensure high-quality audits.

Key Observations from the DOL Study

1. Disconnect with Peer Review: One significant finding from the DOL study is the disconnect between firms' peer review results and the DOL’s findings. Alarmingly, 91% of the deficiencies were found in firms that had passed their latest peer review. This discrepancy can be attributed to the difference in focus between the DOL study, which exclusively targets EBP audits, and peer reviews, which assess the firm's overall system of quality control.

   At Sweeney Conrad, not only do we pass our peer reviews, we go beyond the standard peer review process by conducting internal quality control reviews that specifically focus on EBP audits. This targeted approach helps us identify and rectify any deficiencies unique to EBP engagements, ensuring that our audits meet the highest standards of quality.

2. Importance of Membership in EBPAQC: The study noted a positive correlation between a firm's membership in the AICPA’s Employee Benefit Plan Audit Quality Center (EBPAQC) and lower deficiency rates. Firms that are EBPAQC members showed a significantly lower error rate compared to non-member firms.

   Sweeney Conrad is proud to be a member of the EBPAQC. We adhere to their stringent membership requirements, which include ongoing EBP-specific continuing professional education (CPE) and robust quality control policies. This commitment helps us maintain a high standard of audit quality and stay updated on the latest industry developments.

3. Recurring Deficiencies: Despite ongoing efforts, certain deficiencies continue to appear in audits year after year. These include insufficient review of plan documents, inadequate testing of compliance with compensation provisions, and poor handling of SOC 1 reports.

   Here at Sweeney Conrad, we ensure that every audit begins with obtaining and thoroughly reviewing the latest executed plan document. This ensures our team tests the appropriate provisions and understands the unique aspects of each plan. Our auditors go beyond merely obtaining SOC 1 reports. We conduct a comprehensive evaluation of these reports, focusing on understanding user entity controls and performing necessary tests to validate the design and implementation of these controls. Additionally, we tailor our testing procedures based on a detailed understanding of how the plan defines eligible compensation.

4. Assessing Eligibility, Terminations, and Forfeitures: Auditors should design procedures to test participant eligibility, termination dates, and the proper use of forfeited funds.

   We design our audit procedures to comprehensively assess eligibility, terminations, and forfeitures within our samples. Additionally, our team reviews and tests forfeiture transactions to ensure they are appropriately used as specified in the plan document.

5. Recalculation of Contributions: Testing should include recalculating participant deferrals and employer matches to ensure contributions are authorized and accurate. This step is essential to verify that the contributions align with participant elections and plan provisions.

   At Sweeney Conrad, we place a strong emphasis on recalculating both participant deferrals and employer matches. Our auditors perform detailed testing to ensure that all contributions within our sample are authorized, accurate, and in line with participant elections and plan provisions. This thorough approach helps prevent errors and ensures compliance.

Our Commitment to Quality

At Sweeney Conrad, we integrate these lessons and best practices into our audit approach to enhance the quality of our EBP audits. We remain dedicated to providing value-added services, including recommendations to strengthen internal controls, if any, at the conclusion of our audits. By staying informed of the latest developments and adhering to stringent audit standards, we help ensure the integrity and compliance of your employee benefit plans.

Contact Jamie Gardner, Senior Audit Manager, to learn more about how we can assist with your employee benefit plan audits and help mitigate potential risks.