Client Center

Employee Benefit Plan Audit

Does Your Plan Require An Audit?

The number of people participating in or eligible for your employee benefit plan may provide the answer.

The general rule is that a plan with 100 or more eligible participants must have an annual audit as part of its Form 5500 filings.  The Employee Benefits Security Administration also requires certain other plans to have audits if they do not qualify for exemptions from the annual audit requirement.

An audit will help your company meet the responsibility to file a complete and accurate annual return/report.  The rules and requirements can be complex, so be sure to gain a complete understanding of your responsibilities as the plan's fiduciary.

Why Is An Employee Benefit Plan Audit Important?

Plan sponsors and administrators rely on audited financial statements to prepare a complete and accurate Form 5500 filing.

The plan sponsor may be assessed significant Department of Labor and IRS penalties for failing to file a complete Form 5500.

A high-quality audit can provide a sense of comfort to participants, assist in fulfilling a sponsor's fiduciary responsibilities and identify improvements in plan operations and administration.

How Are Employee Benefit Plan Audits Different?

The scope, or focus, of an employee benefit plan audit goes beyond the money held in trust and the financial activity of the plan.  Plan sponsors and auditors must be familiar with both financial and nonfinancial aspects of the plan. 

Each employee benefit plan is unique and is governed by the plan document.  Auditors must consider compliance with plan provisions including participant data, plan obligations and benefit payments.

Employee benefit plan audits, whether for a defined contribution or defined benefit plan, require specific audit procedures that differ from those performed in an audit of a company's financial statements.

The audit of an employee benefit plan focuses on the activities of the employer, investment custodian and third-party administrator.  This focus will often include reliance upon an SAS No. 70 report on the services provided by custodians and/or administrators.

How Can Your Company Prepare For The Audit?

Sponsors should identify an individual to coordinate the plan's audit.  The designated person is responsible for providing auditors with:

  • Plan documents
  • Financial records
  • Participant records
  • Minutes of board of trustee or employee benefit committee meetings
  • Contracts with third-party service providers and fee arrangements
  • Access to third-party service providers
  • Timely response to inquiries

Your company should:

  • Prepare for the future by undertaking a periodic compliance review even if an audit is not yet required.
  • Plan changes in service providers including asset custodians or payroll systems to minimize additional audit costs that arise when multiple records must be combined.

Plan administrators should be responsible for certain items well before the audit.  Sponsors can take steps to improve the efficiency and quality of plan audits by ensuring that the following items are considered:

  • Plan assets were fairly valued.
  • Contributions to the plan were made on a timely basis.
  • Benefit payments to participants were properly computed and remitted.
  • Contributions and earnings of the plan were properly allocated.
  • "Prohibited transactions" were properly identified and reported.
  • Issues relating to the plan's tax status have been addressed.
  • The plan complies with laws and regulations including plan qualification tests.

Prohibited Transaction any direct or indirect transfer to, or use by or for the benefit of a disqualified person of the income or assets of an employee benefit plan; any act by a disqualified person acting as a fiduciary who deals with the income or assets of a plan for that person's own interest or account


Disqualified Person - a person who is a fiduciary; a person who provides services to the employee benefit plan; an employer whose employees are covered by the plan; an owner, direct or indirect, of 50 percent of the employer or the employee organization; a member of the family of any other disqualified person

Auditors should also consider:

  • The plan's oversight structure, including the role of plan trustees
  • Internal control structure and the related effect on reporting
  • Suggestions for improving internal controls

What Is A Limited-Scope Audit?

In some cases, a plan administrator may elect to have certain plan assets excluded from the scope of the audit of the financial statements.  The excluded assets, typically investments, must be held and certified by specific regulated financial institutions.

The auditor's report for a limited-scope audit will contain a "disclaimer of opinion."  The report will not provide any assurance by the auditor on the financial information, taken as a whole, presented in the plan's financial statements.  The auditor engaged to perform a limited-scope audit must apply procedures to any areas not covered by the certification.

Why Are There So Many Regulations?

Employee benefit plans are subject to regulations and oversight by the Department of Labor's Employee Benefits Security Administration and the Pension Benefit Guaranty Corporation (PBGC).  Plans must also comply with the provisions of the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code.

Each organization enforces rules and regulations with one common theme - protection of employee participants.  While many regulations increase compliance requirements for plans, some may offer administrative relief.  Regulations can change rapidly and must be taken into consideration during the planning stages of each audit.

More information is available at the following Web sites:

Pension Benefit Guaranty Corporation: www.pbgc.gov
U.S. Department of Labor Employee Benefits Security Administration:  www.dol.gov
Internal Revenue Service:  www.irs.gov
AICPA Employee Benefit Plan Audit Quality Center:  www.aicpa.org

To learn more about employee benefit plans and the related audit and regulatory requirements, contact one of our firm's benefit plan audit specialists.

How You Benefit From Our Services

Highly trained and experienced staff – Our professionals have extensive experience in auditing employee benefit plans. We understand the financial and compliance aspects of your benefit plans and can assist you in negotiating the ever-changing regulatory environment.  We can help ensure that your plan meets the reporting requirements.

Specialized knowledge – Our firm has in-depth knowledge of benefit plan design, operation and administration, including the regulatory requirements under ERISA, the IRS, the Employee Benefits Security Administration and the Department of Labor.

National access to professionals – Our firm takes pride in its affiliation with CPAmerica International, a global network of accounting and consulting firms.  Our membership allows us to make available to you the knowledge and resources of thousands of professionals across the country and around the world to provide service wherever your plan operations take you.

For more information, please call us to make an appointment.  515-288-3279 WDM ~ 515-280-1490 Winterset

The technical information in this brochure is necessarily brief.  No final conclusion on these topics should be drawn without further review and consultation.