Over the past year or so, the Department of Labor (DOL) has made a number of announcements expressing concerns about the quality of plan auditors and audits. In particular, in May 2015, the DOL released a report titled “Assessing the Quality of Employee Benefit Plan Audits” that found a very high (39%) deficiency rate for benefit plan audits. The report makes a number of recommendations, including increasing DOL outreach and enforcement related to audit standards. It appears that, as part of this continuing outreach, the DOL has started sending letters to plan administrators of “funded” ERISA employee benefit plans that provide tips for selecting plan auditors.
Among other things, the DOL’s recent outreach letter highlights that substandard audit work jeopardizes plan assets and can result in significant civil penalties. It also explains that a quality audit can help to protect plan assets and make sure that the plan is compliant with applicable law. The letter emphasizes that plan administrators should take care when selecting and retaining an auditor (focusing on the auditor’s knowledge and experience with plan audit requirements and professional auditing standards), and provides a list of factors that plan administrators should consider when selecting and retaining an auditor. Additionally, the letter refers to the DOL’s website page on “Selecting an Auditor For Your Employee Benefit Plan.”
While it does not appear that the recent letters from the DOL are targeting specific plans for investigation or enforcement, the letters serve as an important reminder to plan fiduciaries to exercise appropriate care in the selection and retention of a plan’s auditors. Moreover, plan fiduciaries should consider documenting their activities to memorialize the prudent steps taken to select and monitor the activities of plan auditors.