Sponsors and administrators of employee benefit plans can save time selecting an audit firm and evaluating the quality of their services by writing a detailed request for proposal (RFP). Consider these tips offered by the AICPA’s Employee Benefit Plan Audit Quality Center:
P Provide a brief description of the mission. Describe why the RFP is being released and what its purpose is. The description should include the duration of the engagement and details about the proposal process, such as whether there will be a pre-proposal conference for interested companies, a contact person and a deadline for proposals. Clearly describe the proposal evaluation process and include a right to reject clause.
P Describe the plan, parties involved and where records are kept. Include type of plan, size (number of participants and total assets), name of primary auditor contact for the plan, name of custodian, investment manager and investment monitor, name of the third-party administrator, the name of the person (or company) who prepares the plan’s financial statements, Forms 5500 and 990, and summary annual reports. Include plan office staff size, locations covered by the plan, and locations of personnel records and payroll information for each location. Also indicate whether SAS 70 reports are available from third-party service providers, the type(s) of SAS 70 reports issued, the date(s) SAS 70 reports are available, and the company performing the SAS 70 engagement. Include the name of the law firm/attorney providing ERISA advice (if applicable). Provide referees with copies of the latest 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. Indicate the years of the plan that will be covered by the proposal, the level of assistance the CPA will provide to plan staff, and whether the audit is a full or limited audit in accordance with DOL regulations. Specify that the audit should be performed in accordance with generally accepted auditing standards as well as ERISA and DOL requirements. Also, if applicable, indicate whether the auditor’s report will form part of an 11-K filing with the SEC. Include any regular or special meetings the CPA will be required to attend with the plan trustees or the plan sponsor.
P Ask candidate companies to provide a profile.
This should include size, location and history, number of Employee Benefit Plan (EBP) clients, number of similar type plan audits, states in which the firm is authorized to exercise and references. Ask for the company’s latest peer review report and whether the company is subject to ongoing litigation, DOL findings or referrals, or ethics referrals. Ask if the company meets the independence standards of the AICPA and the DOL. Ask for a description of the firm’s policies and requirements for retention and access to working papers. If the plan’s financial statements will be included as part of an 11-K filing with the SEC, ask if the auditing firm is registered with the PCAOB. Also ask if the company has insurance covering errors and omissions and workers’ compensation.
P Ask for a list of key personnel and their qualifications. These should include the managing partner, partner responsible for the firm’s EBP audit practice, expected levels of staffing and supervision, previous EBP experience, and training of key firm personnel involved in the mission.
P Ask firms to describe their audit approach, fees and schedule.
The audit approach should include sampling and analysis procedures. Fee schedules should detail each service to be rendered. Also provide a list of reports to be issued, expected completion dates for each part of the engagement, expected level of plan staff support to the audit firm, information that should be provided by the plan to the CPA and company workspace requirements
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.