It’s ERISA audit time again. The regular tax season is winding down, and accountants will soon be turning their attention to ERISA plan audits. And if you’re a plan sponsor whose plan is subject to an ERISA audit, selecting a plan auditor is a fiduciary function. So here are a few mistakes to avoid when selecting an auditor:
- Don’t go through a competitive bidding process, but automatically go with your corporate auditor. Employee benefit plan auditing is a specialized field, and many otherwise capable accounting firms don’t have the necessary experience.
- Always select the one with the lowest price. While cost is an important factor, it should not be the only reason an auditor is hired. Sometimes the old adage is true, “you get what you pay for.”
- Don’t ask what training your auditors receive and what continuing education they get. Consider whether they are involved with the Employee Benefit Plan Audit Quality Center at the American Institute of Certified Public Accountants (AICPA).
- Don’t be concerned about continuity of your audit team. Accounting firms, like all firms, have employee turnover. You don’t want to be charged for “training” a new plan auditor every year.
Your fiduciary responsibilities don’t end after the selection process. You also have a duty to monitor. The law does not permit the Department of Labor (DoL) to take direct enforcement action against the plan auditor for a “bad audit”, substandard work. The DoL can, however, take indirect enforcement action against the plan administrator, the person who engages a plan auditor, by imposing civil penalties. An experienced ERISA auditor is good insurance for you to meet your fiduciary responsibility, and to have a better managed retirement plan.