Last week I ran a series of five posts on the peer review reports that are being recalled. The issue is that a pension audit is considered a must-select. When a CPA performs a pension engagement, at least one of those engagements must be selected for evaluation during the peer review.
Vague stories floating around suggest somewhere between 200 and 1,100 reports are being recalled.
At the AICPA Peer Review Conference held last week, there was a presentation on the employee benefit plan (EBP) issue identified by the Department of Labor.
The presentations during the conference can be found here. Choose the Employee Benefit Plans Presentation, in the middle of the page.
I will mention a few highlights from slides 8 through 10.
The DOL asked the AICPA for status of 4,918 firm. That resolves the question on how this got started: DOL asked about and AICPA researched status.
As of the middle of July, the AICPA found 2,703 firms were in compliance, 19 couldn’t be positively matched, and the records in PRISM indicated 2,196 firms did not indicate the firm reported having an EBP audit.
Of the 2,196 firms, the AICPA determined 718 firms are in compliance, 492 firms did not identify performing an EBP when they actually did one, 9 were either not enrolled in the peer review program or reported they did not perform any A&A engagements, and 977 are still under evaluation to determine compliance.
Let me boil that down a little:
- 3,440 – firms in compliance
- 492 – did not report performing an EBP thus one was not included in peer review
- 9 – did not get peer review at all
- 977 – need further research
- 4,918 – total firms referred by DOL
The 9 firms who performed a pension audit but either said they didn’t do any audits or weren’t even enrolled in the peer review program will have a lot of explaining to do.
The 492 firms not getting an EBP audit reviewed will be getting extra attention for a replacement review or accelerated review.
For the firms for which the status is known, that is a problem rate of 12.7% { ( 492 + 9 ) / ( 492 + 9 + 3,440 ) }.
Of those 492:
- 145 had their report recalled
- 124 will be getting an accelerated review under the previous guidance
- 8 are no longer performing EBP audits
- 91 have their review in progress
- 124 have not had their status update to the AICPA by the state administering entity
Two perceived worlds
I don’t know what verbal description was given, but slide 57 is titled “Tale of Two Worlds”.
In one world, 50% of plan auditors perform 6% of the total 82,579 plan audits. In another world, 1% of plan auditors perform 42% of plan audits. This shows a concentration of firms performing EBP audits and a lot of firms doing one or a few.
Extending those numbers shows the following number of firms in three strata: those who perform one or two engagements (called ‘dabblers’ in the presentation), high volume auditors, and the in-between group. The number of firms and EBP audits performed by each strata:
| total | dabblers | midrange | hi-volume | |
| firms | 7,358 | 3,679 | 3,605 | 74 |
| plan audits | 82,579 | 4,955 | 42,941 | 34,683 |
| ave plan/firm | 1.3 | 11.9 | 468.7 |
Keep in mind those high-volume EBP auditors likely spread that pension work across 25 or 75 offices. That would suggest on average each office is performing between 6 and 20 EBP audits. The firms performing 1 or 2 EBP audits present a higher risk of problematic audits in terms of quality and will likely be getting increased attention from the AICPA and peer review committee.
What do you think?
What do you see in the data from the AICPA report?
Comments welcome. Stay professional, please.