Employee Benefit Plan Audit Peer Reviewsmedia.straffordpub.com/products/employee-benefit... ·...
Transcript of Employee Benefit Plan Audit Peer Reviewsmedia.straffordpub.com/products/employee-benefit... ·...
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Presenting a live 110‐minute teleconference with interactive Q&A
Employee Benefit Plan Audit Peer ReviewsEmployee Benefit Plan Audit Peer ReviewsPreparing for Risk Assessment, Control Document Inspection, and Other Peer Reviewer Concerns
1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific
THURSDAY, JUNE 14, 2012
Today’s faculty features:
1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific
Crystal Ekanayake, Partner, Assurance Services, Gallina, Sacramento, Calif.y y , , , , ,
Christopher Etheridge, Partner, Frazier & Deeter, Alpharetta, Ga.
James Smolinski, Partner, Baker Tilly Virchow Krause, Madison, Wis.
For this program, attendees must listen to the audio over the telephone.
Please refer to the instructions emailed to the registrant for the dial-in information.Attendees can still view the presentation slides online. If you have any questions, pleasecontact Customer Service at1-800-926-7926 ext. 10.
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Conference Materials
If you have not printed the conference materials for this program, please complete the following steps:
• Click on the + sign next to “Conference Materials” in the middle of the left-hand column on your screen hand column on your screen.
• Click on the tab labeled “Handouts” that appears, and there you will see a PDF of the slides for today's program.
• Double click on the PDF and a separate page will open. Double click on the PDF and a separate page will open.
• Print the slides by clicking on the printer icon.
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Continuing Education Credits FOR LIVE EVENT ONLY
Attendees must listen to the audio over the telephone. Attendees can still view the presentation slides online but there is no online audio for this program.
Attendees must stay on the line for at least 100 minutes in order to qualify for a full 2 credits of CPE. Attendance is monitored as required by NASBA.
Please refer to the instructions emailed to the registrant for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.at 1 800 926 7926 ext. 10.
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Tips for Optimal Quality
S d Q litSound Quality
For this program, you must listen via the telephone by dialing 1-866-873-1442and entering your PIN when prompted. There will be no sound over the web connection.co ect o .
If you dialed in and have any difficulties during the call, press *0 for assistance. You may also send us a chat or e-mail [email protected] immediately so we can address the problem.
Viewing QualityTo maximize your screen, press the F11 key on your keyboard. To exit full screen, press the F11 key againpress the F11 key again.
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E l B fit Pl A dit P Employee Benefit Plan Audit Peer Reviews Seminar
June 14, 2012
James Smolinski, Baker Tilly Virchow [email protected]
Crystal Ekanayake, Gallina [email protected]
Christopher Etheridge, Frazier & Deeter [email protected]
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Today’s Program
Preparing For The Peer Review[Crystal Ekanayake]
Slide 7 – Slide 10
Documentation Issues[James Smolinski]
Slide 11 – Slide 18
Areas Of Common Error And Deficiency[Crystal Ekanayake]
Slide 19 – Slide 25
Review Team Approach[Christopher Etheridge]
Slide 26 – Slide 45
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PREPARING FOR THE PEER Crystal Ekanayake, Gallina LLP
PREPARING FOR THE PEER REVIEW
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EBP audits: Specialty audit area
DOL continues to find audit deficiencies. Commitment to training and quality control Commitment to training and quality control
EBP audits: Combine financial statement auditing and li diticompliance auditing
Example: Contributions Example: Benefit payments
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EBP audits: Unique reporting requirements
GAAP financial statements DOL reporting requirements DOL reporting requirements IRS supplemental schedule requirements
EBP audits: Increased scrutiny
Example: DOL enforcement initiativesp Example: Peer review requirements
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Two schools of thought for structure
Stand-alone niche EBP audit practice Dedicated team members Dedicated team members Increased depth of knowledge Training from both CPA sources and industry
Extension of the corporation audit team Corporate audit team performs engagement Refresher training each year Emphasis on high-level reviewer
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DOCUMENTATION ISSUESJames Smolinski, Baker Tilly Virchow Krause
DOCUMENTATION ISSUES
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D i E h iDocumentation Emphasis
I. Written audit programs A. No written audit programs = “kiss of death” = modified
opinionopinion
B. Important to note that “one size does not fit all”
1. Tailor for specific types of plans
> Definied contribution
> Health and welfare
> Defined benefit> Defined benefit
2. Tailor for specific scope of plan
> Limited-scope
> Full-scope
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D i E h i (C )Documentation Emphasis (Cont.)
II. System of quality controlsA. How does the firm ensure quality of engagement meets
professional standards?
1. Do you have an internal inspection program?
2. CPE requirements. C equ e e ts
3. Technical review
4. AICPA quality control standards QC Sect. 10A: A firm’s system of quality controlsystem of quality control> Lays out requirements for quality control> Independence checks> Client acceptance and re‐acceptance procedures> Client acceptance and re‐acceptance procedures
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D i E h i (C )Documentation Emphasis (Cont.)
II. System of quality controls (Cont.)
B. How does the firm measure that quality of engagement meets professional standards?
1 Are inspection results disseminated to improve quality?1. Are inspection results disseminated to improve quality?
2. Are CPE requirements tracked and compliance ensured?
3 Is there a second partner or reviewer who does an 3. Is there a second partner or reviewer who does an independent review?
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D i E h i (C )Documentation Emphasis (Cont.)
III. Tools and templatesA. Audit progams
B. Standardized testing templates B. Standardized testing templates
Examples:
Sampling
Participant data testing
EligibilityEligibility
Loans
Distribution
Full-scope investment
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D i E h i (C )Documentation Emphasis (Cont.)
IV. EBPAQC membership requirements
A. Designated audit partner. es g ated aud t pa t e
B. Partners are members of AICPA
C. System of QC (CPE compliance)
D. Monitoring program (Inspection)
E. Peer review report made public
F EBP l t d f iF. EBPs selected for peer review
G. Periodically file info
H. Pay duesH. Pay dues
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D i E h i (C )Documentation Emphasis (Cont.)
V. Inspection requirements
A. Review of specific engagements
B. Review of CPE records
C. Review of training program (if applicable)
D. Summarize and evaluate the findings
E C i t i ti ltE. Communicate inspection results
F. Remediate issues as needed
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D i E h i (C )Documentation Emphasis (Cont.)
VI. Inspection considerations
A. Internal inspections are required in the year of the firm’s peer review.
B. Can be modified to avoid duplication
C Sole practitioners can satisfy the inspection requirement C. Sole practitioners can satisfy the inspection requirement following the AICPA quality control standards in QC Sect. 10.
D C t i i f ti i l d i th EIPA’ bli filD. Certain information is already in the EIPA’s public files.
E. If not avaiable, you can send in your peer review report, and the EBP AQC will coordinated publishing in the peer review public file.
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AREAS OF COMMON ERROR Crystal Ekanayake, Gallina LLP
AND DEFICIENCY
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Compile list of EBP engagements
Classify by size, risk, complexity
Identify engagement staff
Conduct internal inspection
CPE credit: AICPA Audit Quality Center CPE credit: AICPA Audit Quality Center
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Applying new accounting principles through the accounting standards updates (ASUs)
Fair value measurement and disclosures (valuation of Fair value measurement and disclosures (valuation of investments is incorrect)
Untimely remittance of employee contributions Untimely remittance of employee contributions
Incorrect participant data DOH, hours worked, compensation, etc.
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Allocation of contributions and earnings (i.e., wrong %)
Incorrect vesting provision applied Incorrect vesting provision applied
Using correct definition of “compensation” when calculating EE and ER contributions
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Valuation of investments
Participant data: Test the items that actuary uses in calculation (gender, DOB, DOH, wages, etc.)
Qualifications of actuary (document as required by SAS 73)
Assumptions used by actuary: Discount rates
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Incorrect calculation of benefits
Consider independent review of actuarial report Consider independent review of actuarial report
Need Form 5500, Schedule SB to agree employer contributionscontributions
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Accounting challenges
Value of assets
Qualifications of TPA and actuary
Unrecorded liabilities for TPA fees
Not as common so may be more difficult to gather info to Not as common, so may be more difficult to gather info to understand the plan basics
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REVIEW TEAM APPROACH Christopher Etheridge, Frazier & Deeter
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Understanding The FirmUnderstanding The FirmUnderstanding The FirmUnderstanding The Firm
• Synthesize the information gathered during the review
• Understand the causes of deficiencies noted in the firm’s U de sta d t e causes o de c e c es oted t e sperformance
• Develop practical recommendations for changes in the firm’s system• Develop practical recommendations for changes in the firm s system of quality control
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Interviews With Firm PersonnelInterviews With Firm PersonnelInterviews With Firm PersonnelInterviews With Firm Personnel
• Managing partner
• Head of audit departmentead o aud t depa t e t
• Head of quality control
• Head of EBP practice
• Various levels of staff
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What Review Team Wants To LearnWhat Review Team Wants To LearnWhat Review Team Wants To LearnWhat Review Team Wants To Learn
• Risk assessment within firm’s A&A/EBP quality control environment
• Competitive conditions contributing to significant risksCo pet t e co d t o s co t but g to s g ca t s s
• Client dependency in terms of fees generated
• Firm’s monitoring of A&A and EBP practice and delegation to specific individuals
• Firm’s commitment to CPE and acceptance and continuance policies
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Understanding Quality ControlUnderstanding Quality ControlUnderstanding Quality ControlUnderstanding Quality Control
• How are quality control policies and procedures documented?• Any major changes during the last couple of years? • Are quality control materials used by the firm developed internally, e qua ty co t o ate a s used by t e de e oped te a y,
or are they third-party practice aids?• How does the firm monitor the quality of engagements prior to
issuance?• Does the firm perform monitoring procedures or internal
inspections?• Any significant organizational changes that might affect operations• Any significant organizational changes that might affect operations
during the review year?
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Risk AssessmentRisk AssessmentRisk AssessmentRisk Assessment
• Risk factors include: – Results of prior peer review– EBP engagements and hours to total A&A engagement and e gage e ts a d ou s to tota & e gage e t a d
hours– Types of EBP engagements performed– Hours and fees per engagementHours and fees per engagement– Initial engagements
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HighHigh Risk EngagementsRisk EngagementsHighHigh--Risk EngagementsRisk Engagements
• ESOPs
• 403(b) plans03(b) p a s
• Health and welfare plans
• Defined benefit plans
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Peer Review ProceduresPeer Review ProceduresPeer Review ProceduresPeer Review Procedures
• AICPA EBP audit engagement checklist– Report and related disclosures– General audit proceduresGe e a aud t p ocedu es– Working paper areas– Functional areas
“No” answers– No answers
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Categorizing IssuesCategorizing IssuesCategorizing IssuesCategorizing Issues
• Importance of a matter is all down to professional judgment
• Categories of issuesCatego es o ssues– Matter– Finding
Deficiencies– Deficiencies– Significant deficiencies
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MatterMatterMatterMatter
• Result of evaluating whether an engagement submitted for review was performed and/or reported on in conformity with applicable professional standards
• Typically, one or more “no” answers
• If only matters are found, a report rating of “pass” is appropriate
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Matter (Cont )Matter (Cont )Matter (Cont.)Matter (Cont.)
• Documented on a matter for further consideration (MFC) form
• Types of mattersypes o atte s– Review team questions of whether a necessary procedure was
performed– Whether a required footnote was disclosedWhether a required footnote was disclosed– Documentation and minor disclosure-type items
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FindingFindingFindingFinding
• One or more matters that the review captain has concluded result in financial statements or information, procedures, documentation, etc. are not in conformity with the requirements of applicable
f i l d dprofessional standards
• Review captain will conclude whether one or more findings are a deficiency or significant deficiency
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Finding (Cont )Finding (Cont )Finding (Cont.)Finding (Cont.)
• If TC concludes not a deficiency or significant deficiency, documented on a findings for further consideration (FFC) form, and a report rating of “pass” is appropriate
• Types of findings– Multiple documentation matters noted (some of which may be of p ( y
a similar nature but not deemed a material issue; risk and uncertainties footnote)
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DeficiencyDeficiencyDeficiencyDeficiency
• One or more findings that the review captain concludes are material to the understanding of the financial statements or that information, procedures, documentation, etc. are not in conformity with the
i f li bl f i l d drequirements of applicable professional standards
• No evidence that deficiencies occur on all engagements and no other deficiencies; report rating of “pass with deficiencies” is appropriate
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Deficiency (Cont )Deficiency (Cont )Deficiency (Cont.)Deficiency (Cont.)
• Example: More than one EBP engagement is submitted for review, and the exact same deficiency occurs on each engagement
• Example: One EBP engagement had a deficiency, but other EBP engagements were okay
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Significant DeficiencySignificant DeficiencySignificant DeficiencySignificant Deficiency
• Deficiencies are evident on all the engagements submitted for review, the engagements were not performed and/or reported in conformity with applicable standards in all material respects, and a
i f “f il” i ireport rating of “fail” is appropriate
• Example: Financials not materially correct, missing key disclosures, audit programs not completed and insufficient work performed
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Practice TipsPractice TipsPractice TipsPractice Tips
• Address each “No” answer thoroughly
• Professional standards vs. personal preferenceso ess o a sta da ds s pe so a p e e e ces
• Read, review and respond to each MFC and FFC carefully
• Read draft report; pass with deficiencies and fail reports describe the deficiencies and highlight if related to ERISA audits
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Selecting A ReviewerSelecting A ReviewerSelecting A ReviewerSelecting A Reviewer
• AICPA Web site has a database of reviewers
• If reviewed firm is a member of EBAQC, then reviewer must also be e e ed s a e be o QC, t e e e e ust a so bea member
• Reviewer must have experience in same EBP areas of the reviewed• Reviewer must have experience in same EBP areas of the reviewed firm
• Consider selecting a reviewer whose practice is similar to your firm’s• Consider selecting a reviewer whose practice is similar to your firm s practice
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Selecting A Reviewer (Cont )Selecting A Reviewer (Cont )Selecting A Reviewer (Cont.)Selecting A Reviewer (Cont.)
• Consider selecting a reviewer from a larger firm
• Check reviewer referencesC ec e e e e e e ces
• Want a reviewer that is knowledgeable in your practice areas, but reasonable and fairreasonable and fair
• Ask for value; add insights from the reviewer
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Next Review ReadinessNext Review ReadinessNext Review ReadinessNext Review Readiness
• Correct findings immediately; avoid repeat findings
• Communicate findings to your teamCo u cate d gs to you tea
• Consider using outside professionals to perform internal inspections
• Consider specialize ERISA training for your team
• Hire a consultant to do a more in-depth review of your ERISA practice and engagements
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