Employee Benefit Plan Audit Peer Reviews Employee Benefit Plan Audit - PowerPoint PPT Presentation

Presenting a live 110 ‐ minute teleconference with interactive Q&A Employee Benefit Plan Audit Peer Reviews Employee Benefit Plan Audit Peer Reviews Preparing for Risk Assessment, Control Document Inspection, and Other Peer Reviewer Concerns TUESDAY, NOVEMBER 29, 2011 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: James S James S molinski Partner Baker Tilly Virchow Krause Madison Wis molinski, Partner, Baker Tilly Virchow Krause , Madison, Wis. Amanda Eaves, Partner, Null-Lairson , Houston 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, please contact Customer Service at1-800-926-7926 ext. 10 .

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Employee Benefit Plan Audit Peer E l B fit Pl A dit P Reviews Seminar Nov. 29, 2011 James S molinski, Baker Tilly Virchow Krause Amanda Eaves, Null-Lairson james.smolinski@ j li ki@ bakertilly.com b k till aeaves@ @ null-lairson.com ll l i

Today’s Program Rules Governing Benefit Plan Peer Reviews S lide 7 – S lide 13 [James S molinski] Recent Peer Review Experiences S lide 14 – S lide 23 [Amanda Eaves] Documentation Issues S lide 24 – S lide 31 [James S molinski] S lide 32 – S lide 41 Preparing For The Next Peer Review [Amanda Eaves and James S molinski]

James Smolinski, Baker Tilly Virchow Krause RULES GOVERNING BENEFIT RULES GOVERNING BENEFIT PLAN PEER REVIEWS

General Comments Related To Peer Review I. General – licensed firms have peer review requirement A. The report acceptance body (RAB) is either: p p y ( ) 1. State peer review committee 2. AICPA Peer Review Board’s National Peer Review Committee Committee B. SEC registrant’s plans are not subject to peer review. C. All engagements subject to GAAS, SSARS, SSAE, GAGAS and non SEC issuers are subject to peer review and non-SEC issuers are subject to peer review. II. Fiscal year-ends Peer review is due six months after FYE; this affects plans being reviewed. 8

General Comments Related To Peer Review (Cont.) ( ) III. AICPA Audit Quality Center : Peer review practice monitoring task force for employee benefit plans A. Formed to focus specifically on enhancing the peer review quality for EBP audits, as these are considered high risk engagements. B. Recent activities 1. Revised PRP Sect. 20,700 EBP audit engagement checklist (discussed later) 2. Approved 403(b) specific questions added to the pp ( ) p q engagements checklists 3. Additional CPE trainings and webinars offered C C. AICPA staff meet with DOL representives on a quarterly AICPA staff meet with DOL representives on a quarterly basis. 9

Applicable Guidance Related To Peer Review I. Peer review guidance A. AICPA Revised Interpretation 59-1 C p 59 1. PR Sect. 9100: Standards for performing and reporting on peer reviews 2. 2 Interpretations of Sect 100 Interpretations of Sect. 100 3. Systems review and engagement peer reviews B. Peer Review Alert 11-03 - Enhanced peer review guidance for the review of employee benefit plan audit engagements for the review of employee benefit plan audit engagements II. AICPA Employee Benefit Plan Audit Quality Center A. Audit checklist B. Q&A 10

Applicable Guidance Related To Peer Review (Cont.) ( ) III. AICPA Revised Interpretation 59-1 Consideration for selection C A. Reasonable cross-section of the reviewed firm’s accounting and auditing practice B B. Emphasis on higher-risk practice areas Emphasis on higher-risk practice areas 1. Risk of engagements and types of benefit plans as part of the selection criteria 2 2. Limited vs full scope Limited vs. full scope 3. Types of plans (DC, DB, H&W and 403(b) plans) C. Firm’s length of experience and number of audits performed, member’s experience and CPE/specialized training C / 11

Applicable Guidance Related To Peer Review (Cont.) ( ) IV. Peer Review Alert 11-03 03 Unique risk associated with each type of plan A. Defined contribution B B. Defined benefit Defined benefit C. Health and welfare 12

Applicable Guidance Related To Peer Review (Cont.) ( ) V. AICPA Employee Benefits Plan Audit Quality Center A. History 1. 1989 DOL Office of Inspector General report finds 23% 989 O O p G p 3% of audits fail to meet professional standards. 2. 1997 – 2004: Seemed that audit quality was getting worse and spreading to the largest CPA firms p g g 3. EBPAQC established 2004 B. Resource for EBP auditors as well as clients C C. Checklists for peer review Checklists for peer review 1. Tool used to evaluate engagements 2. Detail review for each section of the audit 13

Amanda Eaves, Null ‐ Lairson RECENT PEER REVIEW RECENT PEER REVIEW EXPERIENCES

 Planning  Investments  Contributions  Benefit payments  Participant data and allocations p  Parties in interest  Other 15

Planning documentation Planning documentation 1. Audit scope 2. Communication with those charged with governance Risk assessment 1. Documented 2. 2 Fl Flow through to workpapers th h t k Risk of material misstatement due to fraud 1. Brainstorming 2. Client inquiries 16

Understanding of internal controls q g 1. Inquiries of management 2. Analytical procedures 3. Observation and inspection Initial audits Initial audits 1. Tests of beginning net assets 2. Individual account balances SAS 70 SAS 70 report t 1. Proper use 2. Documentation of review Benefit obligation 1. Calculation 2. Use of actuary 17

Limited-scope audits 1. Certification 1. Certification 2. Qualifying institution 3. Comparison to the financial statements Full-scope audit 1. Tests of year-end market values 2. 2 A Authorization h i i 3. Realized and unrealized gains (losses) Disclosures 1. GAAP 2. DOL rules and regulations g 18

Internal controls over payroll 1. System understanding and documentation 2 2. T Testing ti 3. Deferral authorizations 4. Payroll register Testing of elective deferrals 1. Participant confirmations 2. Alternatives to confirmation 3 3. Definition of compensation e t o o co pe sat o 4. Testing of contribution 5. Authorization of deferrals Timeliness of contributions Timeliness of contributions 1. Controls 2. Schedule 3. Testing 19

Eligibility testing 1 1. Participant data Participant data 2. Timing 3. When are distributions allowed? Review and approval Review of benefit calculations Confirmations Confirmations 20

Payroll testing 1 1. Relevant dates (birth, hire, etc.) Relevant dates (birth hire etc ) 2. Hourly rate or salary 3. Hours worked Eligibility test 1. Eligibility requirements 2. Related data Investment income allocation testing g Total net assets = Total of participant accounts 21

Documentation of work performed D t ti f k f d 1. Related parties 2. Transactions 3. Consideration of financial statement effect d f f l ff  Disclosure  Supplemental schedules 22

Management representation 1 1. Proper representations Proper representations 2. Use of an attorney 3. Late contributions Staffing 1. Supervision 2. Training 3. Experience 23

James Smolinski, Baker Tilly Virchow Krause DOCUMENTATION ISSUES

Documentation Emphasis I. Written audit programs A. No written audit programs = “kiss of death” = modified opinion B. Important to note that “one size does not fit all” p 1. Tailor for specific types of plans > Definied contribution > > Health and welfare Health and welfare > Defined benefit 2. Tailor for specific scope of plan > Limited-scope > Full-scope 25