AICPA discontinues investigation of small CPA firm for alleged deficiencies in audit of employee benefit program

The United States Department of Labor (DOL) has been scrutinizing audits of employee benefit programs, focusing on audit reports that were prepared by small accounting firms. The DOL has reported that they found deficiencies in 75.8% of audit reports prepared by firms with 1-2 CPA's and deficiencies in 68.4% of audit reports prepared by firms with 3-5 CPAs. An audit report can be deemed deficient if the auditor does not have expertise or sufficient experience in these types of engagements. The DOL can assess steep fines against employers who file audit reports that are not in compliance with the regulations. In turn, an employer may seek indemnification from its accountant for these penalties. Additionally, the DOL often refers these matters to the AICPA, or the state societies, for investigation of the accountant.

One of our clients, a CPA firm with two partners, was investigated by the AICPA for alleged deficiencies in the audit of one of these plans. The AICPA focused on whether the CPA firm had the required expertise and experience to perform this audit and whether the accountant’s opinion letter complied with the DOL’s standards. After we provided the AICPA with a detailed response to their investigation, the AICPA discontinued their investigation. Ron Joseph led the LCBF team in successfully defending the accounting firm.