NCACPA EBP Conference

May 7, 2014

ERISA, DOL, and AICPA Audit Quality Initiatives

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Ian MacKay, CPA

Director EBPAQC

American Institute of CPAs® Employee Benefit Plan Audit Quality Center

ERISA Celebrates 40 Years!

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• Gerald Ford signed ERISA into law on Labor Day 1974

• First Form 5500 in 1975 with annual audit requirement

American Institute of CPAs® Employee Benefit Plan Audit Quality Center

At a Glance- Then and Now

Mid-1970’s 40 Years Later Number of US workers 90 million 150 million

Employees participating in employer-sponsored plans

44 million (1975)

129 million (2011)

Number of defined benefit plans 103,000 45,000

Number of defined contribution plans 207,000 638,000

Total assets in private retirement plans $164 billion $13 trillion

Life expectancy at birth- male 67 76

Life expectancy at birth- female 75 81

Savings rate 13% 4.3%

Worker-to-social security retiree ratio 3.7 2.9

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American Institute of CPAs® Employee Benefit Plan Audit Quality Center

Growth of ERISA Plan Audits

(>100 Participants)

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0

10000

20000

30000

40000

50000

60000

70000

1975 1980 1985 1990 1995 2000 2005 2010

Defined Benefit

Defined Contribution

Congress added IRC section 401(k) in 1978

Source: DOL 2011 Form 5500

American Institute of CPAs® Employee Benefit Plan Audit Quality Center

Center started in March 2004

Reception for Designated Partners at the May 13-15

National EBP Conference (Wynn Resort- Las Vegas)

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EBPAQC Celebrates 10 Years!

American Institute of CPAs® Employee Benefit Plan Audit Quality Center

EBPAQC Membership Growth

6

0 159

1060 1257

1444

1689 1877

2057 2206 2274 2310

American Institute of CPAs® Employee Benefit Plan Audit Quality Center

EBPAQC vs. non-EBPAQC firm audits

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67,533 audits (82%)

15,045 audits EBPAQC members

(2,310 firms)

Non-EBPAQC firms (5,048 firms)

Source: DOL 2011 Form 5500

82,579 ERISA audits

American Institute of CPAs® Employee Benefit Plan Audit Quality Center

Use Your EBPAQC Resources

EAlerts

Webinars

Website

Member-to-member Forum

Resource Centers

Tools

Primers

Plan Advisories

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American Institute of CPAs® Employee Benefit Plan Audit Quality Center

ERISA Audit Quality “Ingredients”

Qualifications

• Licensed and independent (ERISA requirements)

• Code of Professional Conduct (AICPA)

Standards

• AICPA Firm Quality Control Standards

• GAAS/AICPA EBP Audit and Accounting Guide

Monitoring

• Peer review (ERISA audits are “must select”)

• DOL reviews (PCAOB for Form 11-k’s)

Enforcement

• AICPA Professional Ethics investigations

• State Boards of Accountancy (license)

Commitment

• EBPAQC

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American Institute of CPAs® Employee Benefit Plan Audit Quality Center

Peer Review Findings- ERISA Audits

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American Institute of CPAs® Employee Benefit Plan Audit Quality Center

DOL Audit Quality Study

Statistical sample of 400 ERISA audits in 2011

• Nearly half the audits selected for review performed by firms

with very few ERISA audits

• Study completed later this year

What do we expect DOL to find?

AICPA actions to enhance audit quality

• EBPAQC Executive Committee and Peer Review Board

recommendations - Increased quality control standards

- Enhanced monitoring

- Best practices tools

- Communications

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American Institute of CPAs® Employee Benefit Plan Audit Quality Center

FASB Advocacy on

EBP Accounting and Reporting

EBPAQC and Expert Panel engaged in substantial advocacy efforts

Goal: Raise FASB awareness about the uniqueness of employee

benefit plan financial statements, including their purpose, users and

preparers.

Observations about difficulties encountered in practice

• 26 page discussion memorandum (“Bucket List”) that identifies areas in

current accounting affecting EBPs that are

- conflicting, redundant, irrelevant, or

- incomplete due to the specialized characteristics of plans.

- See Dec 12, 2013 EBPAQC Alert #309 for link to discussion

memorandum

Result: FASB has agreed to take on a research project on EBP

financial reporting issues.

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