What the DOL’s Audit Quality Findings Really Mean for Plan Sponsors

Many plan sponsors treat the annual employee benefit plan audit as a predictable compliance exercise tied to the Form 5500 filing. In practice, an EBP audit is an important review of the plan’s financial statements, participant data, contributions, distributions, eligibility, and related disclosures.

The Department of Labor’s audit quality findings suggest sponsors should view the audit as more than a routine filing requirement. The studies continue to identify deficiencies in a high percentage of plan audits, with certain issues rising to a level that undermines reliance on the auditor’s work. When that happens, the consequences may include delays, added scrutiny, and potential rejection of the Form 5500 and accompanying audit.

That reality matters for CFOs, benefits leaders, and internal audit teams because audit quality is not an isolated auditor problem. It can also reflect weaknesses in plan administration and sponsor oversight, elevating both compliance and fiduciary exposure.

Where Audit Deficiencies Tend to Occur

The DOL audit quality studies reveal recurring issues in core audit areas, such as insufficient testing of participant data, compensation, and employee contributions. Additional concerns include inadequate procedures for eligibility, forfeitures, distributions, remittance timing, and incomplete financial statement disclosures and documentation. While these issues may seem technical, they often indicate broader concerns.

Inadequate testing of participant compensation can translate into real dollar errors - participants may receive more or less in employer and employee contributions than the plan requires. Insufficient evaluation of remittance timing may miss the fact that policies related to turnaround deposit expectations are unclear or not monitored, increasing the risk of late deposits, lost earnings owed to participants, and potential IRS and/or DOL penalties. And when eligibility testing is weak, eligible employees may be improperly excluded—often requiring the sponsor to make corrective contributions and restore missed opportunities. These deficiencies are rarely isolated; they frequently point to broader breakdowns in plan administration, internal controls, and fiduciary oversight.

Why This Matters for CFOs and Benefits Leaders

The implications extend beyond the audit itself. Under the Employee Retirement Income Security Act of 1974, plan sponsors carry fiduciary responsibility for the plan’s administration, including the selection and oversight of service providers such as auditors.

Audit quality is not solely the auditor’s responsibility; it is integral to the sponsor’s governance framework.

A deficient audit can lead to regulatory scrutiny, delayed filings, or corrective actions. More importantly, it may raise concerns about the adequacy of controls and oversight to protect plan participants.

For financial leaders, this creates a convergence of risks:

• Compliance risk, tied to regulatory expectations and reporting requirements
• Operational risk, tied to how plan processes are executed and monitored
• Governance risk, tied to fiduciary oversight and documentation

Collectively, these risks highlight the need to view the audit as more than a year-end requirement.

Moving from Compliance to Oversight

Organizations that respond effectively adopt a proactive approach to audit readiness and oversight. This typically includes:

• Establishing clear ownership over plan data, including payroll, eligibility, and contributions
• Aligning internal processes with plan document requirements
• Strengthening coordination between HR, finance, and third-party administrators
• Evaluating the scope, approach, and quality of the audit itself

It is equally important to select an audit firm with specialized experience in employee benefit plans and a methodology that addresses common areas of deficiency.

A Framework for Audit Quality

Firms participating in the AICPA Employee Benefit Plan Audit Quality Center adhere to specific standards and ongoing education for employee benefit plan audits. This affiliation, combined with a structured audit methodology, fosters a disciplined approach to risk identification, critical testing, and supporting plan sponsors in meeting their responsibilities.

A well-executed audit should provide insight into plan operations, identify areas for process improvement, and support the organization’s broader governance framework.

Strengthening Plan Oversight Through Audit Quality

Department of Labor enforcement activity reinforces a clear takeaway: a deficient audit can create risk beyond the audit report itself and may point to gaps in plan administration, internal controls, or fiduciary oversight.

For CFOs and benefits leaders, the audit should be viewed as a practical checkpoint for identifying risk, improving documentation, and strengthening plan operations. If you have questions about your employee benefit plan audit or want to evaluate your current approach, contact your CRI advisor to discuss next steps. A proactive approach can help reduce risk and support more consistent, reliable outcomes over time.