Accounting & Auditing | Legislative / Regulatory | Organizational Development

Employee benefit plan audits still don’t make the grade


Back in 2008, Department of Labor Chief Accountant Ian Dingwall took CPAs out behind the proverbial woodshed after revealing that three out of every 10 employee benefit plan audits were failing to meet minimum requirements for professional standards. That left more than $38 billion in Maryland plan assets at risk due to deficient audits.


At the time, Dingwall called that 30-percent deficiency rate "abnormally high and disconcerting," and his message was clear: It's time to clean up those audits.

Now, nearly four years later, I was curious if any progress had been made.

Sadly, the answer appears to be, "No."

"Over the years, we have peformed 1,946 workpaper reviews," Dingwall told me recently, "and unfortunately about a third of those still contain what we consider to be material deficiencies, in that at least one of the requirements in the audit guide is not be adhered to. The primary deficiency is that often auditors will do work, but that work is not documented. We give no credit for undocumented work. That seems to keep the statistic down."

So what should auditors do to set things right?

"Three words -- document, document, document," Dingwall said. "Often they don't take enough credit for the work they've done. If they haven't documented it, we conclude that they didn't do it. That seems to be the biggest factor."

Granted, Dingwall says the economy has played a role in all of this, in a couple of key ways:

  • With so many plans invested in hard-to-value assets, more and more auditors are turning to specialists to help them do their jobs. "A lot of times, auditors are perplexed and overwhelmed at what it takes to audit a health benefit plan," Dingwall said. "The same is true for defined benefit plans. These audits are quite unique and kind of risky propositions. We always invite auditors to go out and get their own specialists, especially in the valuation area. We need to make sure that these valuation experts are doing a good job for us."
  • In a down economy, fraud rears its ugly head with a vengeance. "The (DOL) has brought a number of cases over the last year in which a plan has been harmed because of fraud. We've seen this as a result of a down economy. The same kinds of checks and balances that used to exist in a plan don't exist anymore. We've seen some fairly low-level people steal quite a bit of money out of plans. There's also an uptick in criminal enforcement cases over the last couple of years. I don't think you can have your eyes wide enough open because, frankly, frauds do exist, and they're perpetrated on plans that have a lot of cash."

So yes, auditors are facing some new and unique challenges. But a 30 percent deficiency rate? That's still too high, and it's time to get them right.

Listen to more of Dingwall's ideas for improving ERISA audits in this MACPA podcast.

Want to learn more?
Don't miss the MACPA's 2012 Employee Benefits Plan Audit Conference, slated for May 8 at the Sheraton Columbia. Details are still being finalized; keep an eye on our website for details.

We're also offering a couple of programs related to employee benefit plan audits:

Further details and resources are available by calling the Department of Labor at (202) 693-8360 or at the following sites:


Bill Sheridan