The CPA Profession's Approach to Employee Benefit Plan Audit Quality
Posted on July 1, 2015 View More News
Since our founding, the Hawaii Society of Certified Public Accountants (HSCPA) has been committed to helping our members achieve the highest level of quality in their performance of independent audits. We help our members by providing educational guidance and implementation materials, and monitoring and enforcing compliance with technical and ethical standards set by the American Institute of CPAs (AICPA).
Committing to audit excellence and protecting the public is an important part of our mission. But as diligent and committed as the profession is in the area of audit quality, there are challenges – particularly in specialized industries.
In the category of employee benefit plan audits, our profession must strive to do better.
A recently-issued study by the U.S. Department of Labor (DOL) on employee benefit plan audit quality revealed that a number of audits contained quality issues that must be addressed. While these findings pose a significant challenge to the profession, they also serve as a call to action.
The HSCPA, along with others in our profession, has a long history of tackling issues of audit quality – and we remain resolutely committed to further expanding on those initiatives.
State Society Resources for Employee Benefit Plan Audits
The HSCPA has many resources to help firms perform quality employee benefit plan audits.
A free half-day, in-person continuing professional education session is being develo9ped to assist firms in their audit practice. The HSCPA will be making this available soon – check Professional Development section for details.
Employee Benefit Plan Audit Quality Center
In 2004, the AICPA established the Employee Benefit Plan Audit Quality Center (EBPAQC) as a resource for firms that perform, or are interested in performing, employee benefit plan audits. Over the past decade, the Center has evolved into a community of more than 2,300 CPA firms in 50 states and several territories committed to improving their performance. According to the DOL, audits by EBPAQC member firms produce audits with fewer deficiencies than non-member firms.
The HSCPA is urging more firms in Hawaii to join the EBPAQC, and take full advantage of the many educational webinars, resources and tools it offers, including:
- Timely communication of regulatory and technical updates;
- Webinars on hot topics and best practices;
- A dedicated website with resources and online member-to-member discussion forums for sharing best practices as well as discussions on audit, accounting and regulatory issues; and
- Resources to educate clients
The AICPA has undertaken several new initiatives to help practitioners strengthen their skills and expertise in the area of employee benefit audits, and the HSCPA supports the work of the profession in supporting the Center’s mission and furthering the reach of these initiatives.
Enhancing Audit Quality Initiative
The AICPA last year launched the Enhancing Audit Quality (EAQ) initiative as a holistic approach to improving audit performance. EAQ efforts include boosting accounting education and testing higher-order skills on the next version of the CPA Exam, focusing on audit, quality control, and peer review standards; strengthening ethics enforcement; and providing supplemental guidance and education as necessary.
An EAQ discussion paper published last August generated hundreds of comments from practitioners and other stakeholders on ways to improve audit quality. A Six-Point Plan to Improve Audits, issued in May 2015, incorporates stakeholder input on the AICPA’s strategic thinking to improve audit quality. It provides a roadmap for moving forward in the ongoing journey to maintain audit excellence in a constantly changing, complex business environment.
A major component of this plan is the evolution of the current Peer Review Program, which has long been the foundation of monitoring performance quality. This concept, called Practice Monitoring of the Future (PMoF), is designed to evolve practice monitoring into an ongoing, near real-time process.
Peer Review Evolution
As the nature of business continues to evolve, we are taking steps to ensure that CPAs who are members of the HSCPA have access to quality services.
Currently, our profession’s peer review rating system provides a means by which external stakeholders – from financial statement recipients to regulators – can determine the quality of a firm’s accounting, auditing, and attestation services.
PMoF, still in an early concept stage, marks a necessary leap forward in the evolution of peer review. The idea behind the new process is to enable quality issues to be corrected as the engagement progresses rather than after the audit has been completed, facilitate the prevention of potential audit quality issues, and provide firms with near real-time feedback on their accounting and auditing practices. This process change, as currently envisioned, would enable firms to quickly leverage and implement prescriptive measures to fix engagement issues.
PMoF would be built on a dynamic technology platform and include the following five activities:
- Continuous analytical evaluation of engagement performance
- Human review, when system-identified concerns are raised
- Involvement of external monitors, when necessary
- Periodic inspection of system integrity
- Oversight of the system’s operating effectiveness
Employee Benefit Plan Auditing Competency Framework
The AICPA Competency Framework: Employee Benefit Plan Auditing is designed to help CPAs understand the knowledge and skills necessary to perform high-quality employee benefit plan audit engagements. The framework is underpinned by the need for objectivity, integrity and ethical behavior and includes a commitment to continuously acquire new skills and knowledge. The AICPA also offers targeted learning resources and knowledge checks to assess and enhance your EBP auditing skills on the AICPA|CIMA Competency and Learning Website. The knowledge checks help you identify growth areas, and recommend learning resources such as reports, self-study courses, publications, webcasts and more to bolster your competency.
As stewards of our profession, the HSCPA is firmly committed to enhancing employee benefit plan audit quality among all our member practitioners – from those who perform only one or two a year to those who perform hundreds. We are confident that the steps the profession is taking to address audit quality issues will make a significant difference in future audits of employee benefit plans, and we call on all stakeholders to join us in this effort.