Academic journal article Journal of Accountancy

Best Practices in EBP Audits: Regulatory Pressure Is Heating Up the Market

Academic journal article Journal of Accountancy

Best Practices in EBP Audits: Regulatory Pressure Is Heating Up the Market

Article excerpt

EXECUTIVE SUMMARY

* The Department of Labor requires employee benefit plan (EBP) audits for employers with more than 100 eligible plan participants and some smaller plans. EBPs include defined-benefit, defined-contribution, 401(k) and ESOP, health and welfare, and vacation and severance plans sponsored by a single company or several employers under common ownership. Multiemployer plans often include their attorneys and actuaries at trustee meetings to help them make decisions.

* A well-developed pension practice can convert what's often seen as so-so CPA service line into a very good business. Another plus is that an EBP audit niche can provide a firm with steady work from as early as March to October. Once launched, EBP practice remain relatively intact because companies don't like to disrupt those areas. The DOL will continue to monitor these audits, so the niche here to stay.

* The keys to developing a successful EBP audit practice are to name a niche champion, train staff thoroughly and stay current on regulatory developments. Set up lines of communication to exchange timely information with the client. Nothing derails a schedule more than finding out late in the engagement that a third party failed to provide required documentation.

* There's risk: If auditor error or deficiency occurs, the DOL can levy significant fines and/or report firms to state boards of accountancy and the AICPA professional ethics division. Possible disciplinary actions againts responsible parties include sanctions or loss of license.

* Largely paperless audits are a fact of life. Meetings with administrators and boards of trustees used to be opportunities to build client relations, but the Internet and other technologies are re-shaping the professional by reducting face-to-face contact with clients.

**********

"Benefits auditing is something of a sleeping giant," says Thomas M. Clifford, CPA, a Parente Randolph LLC partner in Philadelphia. "There's great potential for a firm with a well-developed pension practice to convert what's often seen as a so-so service line into a multimillion-dollar business that supports several partners full-time."

Clifford isn't alone in seeing the opportunity In this article principals from large and small CPA firms with strong employee benefit plan (EBP) audit practices share niche-building tips.

IT'S A GROWTH AREA

The Department of Labor (DOL) requires all employers with more than 100 eligible benefit plan participants and certain smaller plans to conduct EBP audits. More than 75,000 EBP audits are conducted each year, and the market is good and growing. "National firms preoccupied with Sarbanes-Oxley are shedding lower-margin engagements such as pension plans, or they are pricing jobs so clients go elsewhere," Clifford says. And because benefit plans are separate entities from the companies offering them, CPAs can audit just the plan even if they don't audit the company's financial statements.

EBPs for large and small public and private companies and not-for-profits include defined-benefit, defined-contribution, 401(k) and ESOP, health and welfare, vacation and severance plans (see "An EBP Glossar"). They can be sponsored by a single company or several employers under common ownership (multiemployer), and many companies have more than just one plan type.

Multiemployer plans make good clients because they generally have large assets and are responsive to auditor suggestions, says CPA David Evangelista, a partner of Goldstein Lieberman & Company LLC in Englewood Cliffs, N.J. He considers EBP audit work genuinely enjoyable. "We attend board meetings and see how labor and management boards of trustees interact while representing different sides, which is exciting," he says. "It's very satisfying when they implement our recommendations."

RISK AND RESPONSIBILITY

The downside of an EBP audit practice is that Department of Labor regulations create risk. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.