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The report presents findings from a trend analysis of benefit plan auditors using 5500 filing data and audit reviews conducted by Employee Benefits Security Administration (EBSA) between plan years 2011 and 2015. EBSA administers and enforces the reporting, disclosure, and fiduciary requirements of Title I of the Employee Retirement Income Security Act of 1974 (ERISA). EBSA’s Office of the Chief Accountant, Division of Accounting Services enforces annual audit requirements of employee benefit plans. To assess whether Certified Public Accountants (CPAs) perform benefit plan audits in accordance with industry standards, EBSA reviews the audit work papers of a subset of the overall population of benefit plan audits, completes site visits for the audit firms that perform more than 100 benefit plan audits each year, and performs numerous liaison and outreach activities with professional groups that service employee benefit plans. This report analyzes CPA selection and switching behavior over time using 5500 filing data and EBSA’s audit reviews.

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Research Questions

• How does the population of CPAs change over time?
• How do CPAs behave after contact with EBSA?
• What CPA characteristics predict CPA exit from the benefit plan industry?
• Are plans more likely to switch CPAs after any EBSA review?
• How long does it take plans to switch CPAs after an unfavorable review?
• Among plans that switch CPAs, how does the pre-switch CPA compare to the post-switch CPA?
• Does EBSA review predict a plan’s decision to switch CPAs?
• What plan-level characteristics are associated with a higher switch rate?
• Is CPA employee benefit plan practice size associated with a higher switch rate?
• What reasons do plans provide for terminating a CPA on Form 5500?
• What plan and CPA characteristics predict a plan’s decision to switch CPAs?

Key Takeaways

• Employee benefit plan practice size was the strongest predictor of CPA firm exit from the industry.
• On average, 7.5% of employee benefit plans switched CPA firms every year.
• Plans with an audit that received a major deficiency of audit work papers were more likely to switch CPA firms than all other plans.

Citation

Brotsos, H., Langford, R., McAllister, J., Meier, C., Moore, B., Urdapilleta, O. (2018). Summit Consulting. An Analysis of Benefit Plan Auditors. Chief Evaluation Office, U.S. Department of Labor.

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The Department of Labor’s (DOL) Chief Evaluation Office (CEO) sponsors independent evaluations and research, primarily conducted by external, third-party contractors in accordance with the Department of Labor Evaluation Policy and CEO’s research development process.