By Michael Lawrance
The plan auditors own the audit work papers. However, if the auditors do not document the audit appropriately, then you, the plan sponsor, can be held liable. This may seem rather absurd, however, plan sponsors choose their auditors. Therefore, you as plan sponsor, have a fiduciary obligation to make sure the audit meets the minimum requirements of the Department of Labor. The typical reason the Department of Labor cites that plan audits are botched is an inexperienced auditor. Let’s face it, most accounting firms, even large ones with dedicated practices to various industries, often see benefit plan audits as a way to make billable hour targets during the Summer and early Fall. Benefit plans audits are just not taken seriously by many firms. This is dangerous. A failed benefit plan audit has serious repercussions for the plan, the plan sponsor, and even participants.
Often, a firm provides the benefit plan audit as a packaged deal with the plan sponsor’s audit and tax preparation. This seems to be a win-win scenario in which the plan sponsor has its professional accounting needs handled by one firm that can provide a better price due to the extra volume of services. The flaw in this logic is that while the auditor may be an expert on the plan sponsor’s primary business and provide extraordinary business insights, the auditor may have little care or knowledge of how to perform a benefit plan audit. The hidden costs of a failed benefit plan audit can ruin the relationship the plans sponsor has with the participants, the Department of Labor, and the auditor.
The more responsible approach is to let the experts do what they do best. If you think your company auditor is an ace in your industry, then by all means retain the firm for future years. However, please use caution when it comes to contracting for benefit plan services. It may be better to retain a firm with a dedicated benefit plan practice to reduce your exposure to governmental fines and the related embarrassment of a deficient plan audit.
Copyright 2009 Salmon Sims Thomas PLLC