Obtaining Quality Employee Benefit Plan Audit Services - The Request for Proposal

Employee benefit plan sponsors and ­administrators can save time selecting an audit firm and evaluating the quality of its services by writing a thorough Request for Proposal (RFP). Consider these tips offered by the AICPA Employee Benefit Plan Audit Quality Center:

P Provide a brief description of the engagement. Describe why the RFP is being released and what its objective is. The description should include the term of the engagement and details about the proposal process such as whether there will be a pre-proposal conference for interested firms, a contact person and a due date for proposals. Clearly outline the proposal evaluation process and include a right-to-reject clause.

P Describe the plan, parties involved and where records are kept. Include the type of plan, size (number of participants and total assets), name of the auditor’s principal contact with the plan, name of custodian, investment manager, and investment monitor, name of third party administrator, name of the individual (or firm) who prepares the plan’s financial statements, Form 5500 and Form 990, and summary annual reports. Include the size of the plan’s office staff, locations covered by the plan, and locations of personnel files and payroll information for each location. Also include whether SAS 70 reports are available from third-party service providers, type(s) of SAS 70 reports issued, date(s) when SAS 70 reports are available, and the firm that performs the SAS 70 engagement. Include the name of the law firm/attorney that provides ERISA counsel (if applicable). Provide respondents with copies of the last full audit report, management letter, Form 5500 with all attachments, interim financial statements, and summary plan description.

P Explain the scope and any special considerations. Include the plan years to be covered by the proposal, the level of assistance the CPA will render to the plan’s staff, and whether the audit is a full- or a limited-scope audit in accordance with DOL regulations. Specify that the audit must be performed in accordance with generally accepted auditing standards as well as ERISA and DOL requirements. Also, if applicable, include whether the auditor’s report will be part of an 11-K filing with the SEC. Include any regular or special meetings the CPA will be expected to attend with plan trustees or the plan sponsor.

P Ask candidate firms to provide a profile. This should include the size, location, and history, number of ­employee benefit plan (EBP) clients, number of similar-type plan audits, states in which the firm is licensed to practice, and references. Ask for the firm’s latest peer review report and whether the firm is subject to any current litigation, the subject of any DOL findings or referrals, or ethics referrals. Ask whether the firm meets AICPA and DOL independence standards. Ask for a description of the firm’s working paper retention and access policies and requirements. If the plan’s financial statements will be included as part of an 11-K filing with the SEC, ask whether the audit firm is registered with the PCAOB. Also ask whether the firm has insurance to cover errors and omissions and workers’ compensation.

P Request a listing of key personnel and their qualifications. These should include the managing partner, partner in charge of the firm’s EBP audit practice, expected levels of staffing and supervision, prior EBP experience and training of key firm personnel involved with the engagement.

P Ask firms to describe their audit ­approach, fees and scheduling. The audit approach should include sampling and analytical procedures. Fee schedules should detail each service to be rendered. Also provide a listing of reports to be issued, expected completion dates for each portion of the engagement, expected level of plan staff assistance to the audit firm, information that is expected to be provided by the plan to the CPA, and work space requirements of the firm

Source: Adapted from “Obtaining Quality Employee Benefit Plan Audit Services: The Request for Proposal and Auditor Evaluation Process,” AICPA Employee Benefit Plan Audit Quality Center, www.aicpa.org/ebpaqc.


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