1) DOL Audit Quality Study
Update
COLLEEN K. CONRAD, CPA, EXECUTIVE VP & CHIEF OPERATING OFFICER
MARIA L. CALDWELL, ESQ., CHIEF LEGAL OFFICER & DIRECTOR OF
COMPLIANCE SERVICES
© 2015
2) DOL EBSA Audit Quality Study
•â€¯ Released
5/28/2015
•â€¯ Reviewed
400
plan
audits
from
2011
Form
5500
ï¬lings
•â€¯ Six
strata
using
#
of
audits
per
ï¬rm
•â€¯ Random
sampled
within
each
strata
•â€¯ Analyzed
licensing
and
peer
review
status
as
part
of
study
© 2015
3) Key AQS Finding
Major
GAAS
Deï¬ciencies
-­â€
Reject
Form
5500
(39%)
Compliant
or
Minor
Findings
(61%)
© 2015
4) Trend of AQS Audits with
GAAS Deï¬ciencies
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
39%
33%
23%
1988
19%
1997
2004
2014
Audits
with
GAAS
Deï¬ciencies
© 2015
5) AddiPonal AQS Findings
•â€¯ 17%
of
audit
reports
didn’t
comply
with
ERISA
reporNng
/
disclosure
requirements
•â€¯ The
smaller
the
ï¬rm’s
EBP
audit
pracNce,
the
greater
overall
deï¬ciency
rate
and
increased
number
of
deï¬cient
audit
areas
•â€¯ Decline
in
quality
appears
to
have
some
nexus
to
increased
#
of
limited
scope
audits
•â€¯ Concern
that
peer
review
and
pracNce
monitoring
efforts
are
not
improving
audit
quality
or
idenNfying
deï¬cient
EBP
audits
© 2015
6) Audits Containing 5+ Major Deï¬ciencies
and Clean Peer Reports
Strata
(Audits)
Deï¬cient
Audits
w/
5+
Deï¬ciencies
and
Clean
Peer
Review
Report
1-­â€2
3-­â€5
6-­â€24
25-­â€99
100-­â€749
750+
35%
(33)
36%
(34)
37%
(35)
22%
(14)
4%
(1)
4%
(1)
© 2015
7) Audit Deï¬ciency Rate by EBPAQC Status
82.30%
100.00%
80.00%
60.00%
40.00%
29.90%
20.00%
0.00%
EBP-­â€AQC
Members
EBP-­â€AQC
Nonmembers
© 2015
8) DOL RecommendaPons -­â€ Enforcement
•â€¯ Target
for
inspecNon:
◦  CPA
ï¬rms
with
smaller
EBP
audit
pracNces
and
larger
$$
of
plan
assets
◦  CPA
ï¬rms
audiNng
25-­â€99
EBPs
due
to
high
deï¬ciency
rate
and
large
#
of
plan
parNcipants
and
$$
of
plan
assets
at
risk
•â€¯ Work
more
closely
with
NASBA
and
State
Boards
•â€¯ Amend
ERISA
to
allow
penalNes
against
audit
ï¬rms
•â€¯ Peer
review
◦  Work
with
AICPA
to
streamline
and
improve
peer
review
to
improve
quality
◦  Ensure
EBP
audit
ï¬rms
undergo
peer
review
◦  Refer
audit
ï¬rms
without
acceptable
peer
review
to
Boards
of
Accountancy
© 2015
9) DOL RecommendaPons –
Regulatory / LegislaPve
•â€¯
Amend
ERISA
deï¬niNon
of
“qualiï¬ed
public
accountant”
to
include
addiNonal
requirements
and
qualiï¬caNons
•â€¯
Repeal
limited-­â€scope
audit
exempNon
or
further
regulate
use
•â€¯
Amend
ERISA
to
give
Secretary
of
Labor
authority
to
establish
accounNng
and
audiNng
principles
for
EBPs
© 2015
10) DOL RecommendaPons -­â€ Outreach
•â€¯ Work
with
NASBA
/
State
Boards
to
encourage
requirement
of
speciï¬c
licensing
requirements
for
EBP
auditors
•â€¯ ConNnue
outreach
acNviNes
with
plan
administrator
organizaNons,
plan
administrators,
CPA
ï¬rms
•â€¯ Communicate
results
of
AQS
to
all
Boards
of
Accountancy
stressing
need
to
ensure
only
competent
CPAs
perform
EBP
audits
•â€¯ Expand
outreach
to
state
CPA
socieNes
with
large
number
of
ï¬rms
in
the
1-­â€5
EBP
audit
strata,
encouraging
more
training
programs
© 2015
11) CollaboraPve Effort…
Accountancy
Boards
AICPA
Department
of
Labor
(DOL)
NASBA
© 2015
12) Where We Have Been…
Since
2005,
DOL
made
507
rouNne
referrals
481
to
the
AICPA
89
to
BOAs
Over
65%
of
referrals
to
AICPA
conclude
with
issuance
of
conï¬denNal
RCA
Leier
© 2015
13) DOL Audit Quality Referrals….
DOL
has
made
145
referrals
132
to
the
AICPA
13
to
BOAs
Over
65%
of
referrals
to
AICPA
conclude
with
issuance
of
conï¬denNal
RCA
Leier
© 2015
14) Outcome of Previous Referral Process…
DOL
is
concerned
about
the
current
system,
but
BOAs
need
to
be
involved
in
ALL
cases
The
BOAs
had
no
real
insight
as
to
the
magnitude
of
the
number
of
deï¬cient
audits
© 2015
15) What Boards Have Done…
AcNons
Taken
by
Boards
of
Accountancy
Closed
with
Discipline
(26%)
No
Record
of
Referral
(19%)
Closed
with
No
Data
Available
(10%)
Closed
with
Compliance
(4%)
Deceased
Respondent
(2%)
In
Progress
(23%)
Closed
with
No
ViolaNon
(10%)
Closed
Due
to
Insufficient
Evidence
(5%)
Lack
of
JurisdicNon
(3%)
© 2015
16) How to Improve CollaboraPon and
Results…
Improve
referral
process
to
ensure
the
DOL
referral
informaNon
is
sent
to
the
appropriate
board
contact
All
DOL
referrals
should
be
made
to
the
Boards
going
forward
Use
of
Consents
to
allow
sharing
of
invesNgaNve
ï¬les
with
Boards
by
DOL
Use
of
AICPA/BOA
CooperaNve
Enforcement
Process
AICPA
to
consider
changes
to
AutomaNc
SancNoning
Guidelines
that
are
triggered
upon
Board
acNon
© 2015
17) Next Steps…
ConNnue
dialogue
with
DOL
and
AICPA
to
establish
process
for
making
referrals
Provide
relevant
consent
forms
for
Boards
to
use
when
opening
a
complaint
to
allow
DOL
and/or
AICPA
to
share
invesNgaNve
ï¬les
Work
to
improve
communicaNon
among
the
DOL,
Boards,
AICPA
and
NASBA
Monitor
progress
being
made
on
DOL
referrals
© 2015
18) More to Come…
Look
for
email
to
EDs
from
NASBA
conï¬rming
appropriate
DOL
referral
contact
NASBA
will
meet
with
DOL
regarding
consents
needed
to
share
ï¬les
and
proper
referral
process
Detailed
informaNon
will
be
shared
with
Boards
on
AICPA/BOA
CooperaNve
Enforcement
effort
Input
from
Boards
will
conNnue
to
be
obtained
and
shared
© 2015
19) QUESTIONS?
© 2015
