Auditing employee benefit plans.

Auditing employee benefit plans is not a risk-free activity. The American Institute of CPAs professional ethics division has released a summary of the most frequent technical standards violations in 52 employee benefit plan audit engagements investigated by the division after referral from the Pension and Welfare Benefit Administration (PWBA) of the U.S. Department of Labor.

ERISA 

Under the Employee Retirement Income Security Act of 1974 (ERISA), employee benefit plans with more than 100 participants are required to have annual audits conducted in compliance with generally accepted auditing standards. The financial statements and audit reports accompany each plan's form 5500, which is forwarded annually to the Department of Labor.

The PWBA has a continuing program to ensure submitted financial statements and reports meet applicable AICPA and ERISA standards. In August 1989, PWBA initiated a program to refer to the AICPA professional ethics division the employee benefit plan audits the PWBA deemed substandard.

INVESTIGATION PROCEDURES

The ethics division's technical standards subcommittee is responsible for conducting investigations of Labor Department referrals. The subcommittee formed a subgroup of 10 members experienced in pension plan audits to ensure referrals are handled consistently and expeditiously. Each investigation is conducted according to established division procedures, giving the members involved an opportunity to discuss the issues raised.

While the professional ethics division does not disclose information about ethics investigations, the division believes making practitioners aware of the most frequent deficiencies will enable them to avoid the pitfalls of substandard performance. Practitioners also can use the information in planning and performing future engagements.

RESULTS

Exhibit 1, below, shows a breakdown of the most frequently encountered technical standards violations in investigations of 52 benefit plan audit engagements.

Exhibit 2, page 105, shows a distribution of the engagements by type of plan as well as by the type of engagement.

ADDITIONAL INFORMATION

The AICPA offers conferences, courses and reference materials for CPAs who perform employee benefit plan audits.

* The 1992 AICPA National Accounting and Auditing Conference on Employee Benefit Plans will be held December 14-15 in Washington, D.C. Registration information is available by calling the meetings department at [phone].

* The AICPA continuing professional education division offers two related self-study courses. Basics of Pension and Profit-Sharing Plans and Audits of Employee Benefit Plans both can be ordered by calling the AICPA order department at 1-800-862-4272.

* The AICPA audit and accounting guide Audits of Employee Benefit Plans presents the recommendations of the AICPA employee benefits plan committee on the application of GAAS to audits of employee benefits plans' financial statements. It also can be purchased through the AICPA order department.

* ERISA REQUIRES employee benefit plans with more than 100 participants to have annual audits in compliance with generally accepted auditing standards.

* THE PENSION and Welfare Benefit Administration of the Department of Labor has a program to refer employee benefit plan audits it deems substandard to the AICPA professional ethics division.

* TO HELP practitioners plan future audits and avoid substandard performance, the professional ethics division has released a breakdown of the most frequent technical standards violations in 52 audit engagements.

* THE AICPA OFFERS conferences,courses and reference materials for CPAs who perform employee benefit plan audits.