Employee Benefit Plan Audits

11/12/2021


Independent public accountants are usually the only qualified professionals qualified to do employee benefit plan audits of large companies. This is because all tax laws are considered legal and binding and cannot be changed. When properly executed, the audits are attached to the employee's Form 5500 (annual return/statement of employee benefit) form filing. The SOC 3 compliance  makes it very easy for you to access, review, and adjust the funds in your retirement account and other accounts. You can also get a free tax quote from them.

There are many advantages to having an independent financial professional perform an employee benefit plan audit. One of the primary reasons is that they have extensive experience in dealing with these types of issues. The second primary reason is that most accountants will have access to privileged information that regular accountants do not. In addition, an auditor has extensive training and experience in using the tax laws to their advantage. Lastly, most internal auditors will have a thorough knowledge of the accounting procedures and standards employed by the employer.

There are several common methods used by internal auditors to determine the quality of employee benefit plan audits. Among these methods are comparisons of cost of insurance, assets under the plan, termination benefits owed, lifetime benefit coverage, return of investment, employee demographics, etc. comparisons are generally made on an annual or bimonthly basis. Sometimes an individual may request an un-scoped audit of a smaller area. In this case, the accountant will review the pertinent documentation in detail. However, a standard review is usually sufficient to detect fraudulent activity.

Internal auditors are required to prepare and provide a written report of their findings on the benefits, assets, liabilities, and events under the various sections of the plan. They are also expected to make recommendations for changes in the procedures and/or regulations that they reviewed. An example of documentation that would be presented in an employee benefit plan audit includes the following: an application/contract, a receipt, statements/payments, tax returns, statements/payments, work orders, payment vouchers, appraisals, tax records, and business documents. It is very important that these documentation be prepared accurately and completely. In instances where a deficiency is detected, corrective actions must be taken immediately.

A typical employee benefit plan audits  involves three main areas that need to be examined: participant data, procedures and controls, and accounting procedures. Each of these areas will need to be thoroughly reviewed and compared. For example, in an employee benefit plan that provides coverage for employees that are death or disablement eligible, the administrator's errors will have a negative effect on the benefits. Therefore, the review of the participant data will focus on ensuring that death and disablement rates are reported accurately and that appropriate reporting criteria are applied to the data. The next area that will need to be reviewed is the administration of the plan itself.

Reviewing the financial statements is a very important part of these reviews. These reports are used to track how effectively the employer has managed the funds provided in the plans. Auditors will look at recent changes in the laws that may have affected the performance of an employer's employee benefit plans. They will also review the company's process for collecting premiums and may look at the costs of maintaining the plans. It is also possible that the recent changes may mean that adjustments need to be made to the employee benefit plans themselves.For a general overview of this topic, click here: https://en.wikipedia.org/wiki/Audit_management .

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