EBSA-enhanced programs to assess plan audit quality: AICPA issues new alert and guide to address issues.

The Employee Benefits Security Administration (EBSA) is enhancing its programs aimed at assessing and improving the quality of employee benefit plan audits.

According to the EBSA, 37 public accounting firms audit more than 100 plans that cover approximately 80 percent of plan assets subject to audit. In addition, 8,200 firms perform five or fewer audits. Accordingly, the EBSA has modified its approach for selecting and evaluating ERISA audits, using both top-down and bottom-up strategies.

First, the EBSA will conduct periodic inspections of firms with substantial ERISA audit practices. EBSA staff will meet with firm management, review firm policies and procedures that relate to employee benefit plan audits, and conduct on-site reviews of a sample of ERISA audit engagements. This "top-down" approach will provide the EBSA a more efficient means of evaluating the quality of audit work performed by these large firms and ensure that findings and recommendations are communicated to those in a position to effect any necessary changes.

Audit quality will also be the primary focus of much of the EBSA's desk reviews. The agency will focus its in-house work on reviewing copies of selected audit working papers prepared by firms with small to medium-size audit practices. In instances in which deficient audit work is identified, the related Form 5500 filings will be subject to rejection, and auditors will potentially face referral to the AICPA's Professional Ethics Division or State Board of Public Accountancy.

Timeliness of Remittance of Participant Contributions Remains an Enforcement Initiative for the EBSA

The EBSA continues to focus on the timeliness of remittance of participant contributions in contributory employee benefit plans. Participant contributions are plan assets on the earliest date that they can reasonably be segregated from the employer's general assets, but in no event later than (1) for pension plans, the 15th business day of the month following the month in which the participant contributions are withheld or received by the employer, and (2) for welfare plans, 90 days from the date on which such amounts are withheld or received by the employer.

Reporting of Late Remittances

Failure to remit or untimely remittance of participant contributions constitutes a prohibited transaction under ERISA section 406, regardless of materiality. Such transactions constitute either a use of plan assets for the benefit of the employer or a prohibited extension of credit. In certain circumstances, such transactions may even be considered an embezzlement of plan assets.

Linda C. Delahany, is an AICPA Technical Manager, Accounting and Auditing Publications. This is adapted from "Employee Benefit Plans Industry Developments--2005."