The picture above certainly does not represent today’s accountant. And in a similar vein the Department of Labor (DoL) wants to know whether its Interpretative Bulletin 75-9 published over 30 years ago relating to the independence of accountants who audit ERISA plans is still relevant. The DoL published a notice yesterday in the Federal Register asking for comments on this matter.
Generally, Federal law requires that Plan Administrators of certain employee benefit plans, e.g., retirement plans that file Form 5500 (100 or more participants) are required to attach an independent qualified public accountant’s opinion.
The independent qualified public accountant must examine the plan’s financial statements and other records to determine whether the financial statements and schedules required to be included with Form 5500 are presented fairly and in conformity with generally accepted accounted principles. Retirement plan service providers like our firm often refer to the accountant’s report and financial statements collectively as the "audit report".
The auditor auditor engaged for the employee benefit plan audit must be licensed or certified as a public accountant by a State regulatory agency and should not have any should not have any financial interests in the plan or the plan sponsor.
It is this last requirement that the DoL wants to reevaluate in light of the significant changes that have taken place in the business environment in general and the accounting profession in particular.
The 1975 DoL Interpretative Bulletin describes three types of relationships in which the Agency would not consider the accountant to be independent: That is, during the audit engagement and during the period covered by the audit, the accountant, his or her firm, or any member of the firm cannot:
(1) Have or be committed to acquire any direct financial interest or any material indirect financial interest in the plan or the plan sponsor;
(2) Have a connection to the plan or plan sponsor as a promoter, underwriter, investment advisor, voting trustee, director, officer or employee of the plan or plan sponsor; and
(3 Maintain financial records for the employee benefit plan.
At a later date, I’ll discuss some practical matters that a plan sponsor should consider in retaining the auditor and preparing for the audit. In the meantime, here are the relevant links:
And a hat tip to Steven Taub at CFO.com.