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Understanding the Role of an ERISA Audit!
Understanding the role of a financial statement audit of a retirement plan in accordance with ERISA can provide useful information in better demonstrating fiduciary responsibility. Consider the following.
- The Financial Reporting Element – Financial statement are public information and included as part of the electronic filing of Form 5500. As auditors, we provide an opinion on the fair presentation of the financial statements in accordance with ERISA. An important note is that included in the disclosures of the financial statements are such items as prohibited transactions, late deposits, required disclosures for transactions with parties-in-interest, the tax status of the Plan, etc.
- A Participant Protection Element – Auditors are required to communicate deficiencies, which rise to the level of either a significant deficiency or a material weakness through a written management letter. Keeping an open dialogue with their auditors and other professionals to identify and correct such deficiencies on a timely basis, can help reduce the identification of such matters. Auditors also make other inquiries/communications with trustees regarding the overall governance of the Plan.
Plan fiduciaries should maintain a dialogue on the types of processes that they can improve in order to better meet these two elements of a financial statement audit. Understanding and helping auditors meet these two requirements has the added benefit of meeting fiduciary responsibility.