Question for CPA's

[austin3515]

What are other CPA firms doing to establish the proper payee is receiving funds from distributions from retirement plans?

For example, as a CPA, how would you ensure that if the trustee says John Doe received a $10,000 distribution, how do you know that the trustee sent it to John Doe and not the Administrator who set up a bogus bank account to steal John Doe's money?

Are you sending out confirms? How do you know you have the right address?

I don't believe the question changes if the distribution elections are done paperless on the Internet or via paper forms (which can easily be forged)

Please advise

[GBurns]

Why CPAs?

What makes you think that this is even within their usual area of expertise or training?

[Blinky the 3-eyed Fish]

Unless John Doe is in a coma, wouldn't he know he didn't get his money and raise quite a stink about it?

[BFree]

CPAs who audit plans we administer have at times contacted participants directly to ask the question.

[Guest b2kates]

I do not agree that the forms can be easily forged. If it is a distribution as a lump sum, thereby avoiding the J&S rules, the participant needs a spousal waiver which must be notarized.

Are you also saying that the notary is " cheating"?

[BFree]

Avoid J&S, but need a spousal waiver that is notarized?

[Guest TAG]

GBurns- what makes you think it isn't. Actually, as both a CPA and ASPA designee I have imagined hundreds of schemes one might uncover to redirect money from participants' accounts elsewhere . Why do J&S rules matter, since when does a third party financial institution receive much more than a letter from a trustee to commence transfer of funds? What could prevent someone from breaking into the desk of a notary or sneaking a stamp during a quick absence? Only honest people follow rules.

Bottom line is this. If someone wants to steal they will derive a method....that of course does not mean they won't eventually be caught. The Big House is full of self imagined geniuses.

The internal controls inherent in most financial systems will detect this type of activity eventually...and yes Blinky, something as simple as receiving (or not) a statement would definitely trigger a fatal mistake.

As far as an audit -a statistical sampling, a complete audit trail and subsequent positive confirm should do the trick.

Isn't life Grand!

[GBurns]

TAG

I am surprised that as a CPA candidate you do not know what your course of study and the curriculum to be covered for your exam is.

You can simply visit the AICPA website and see what the exam covers. As you will see the CPA exam does not cover this or any related topic, as a result this topic and related topics are not in the curriculum of study and are not in the prerequisite Baccalaureate degree programs either. Pension plans and pension plan auditing etc etc is just not within the educational range of a CPA, it is learned, if at all, outside the CPA arena.

Here is a link to the actual exam:

http://www.cpa-exam.org/cpa/faq004.htm

[mbozek]

GB: I dont know where you are from but accounting firms in NY & NJ (including Big 4 firms) offer audits of qualified plan to clients as part of their professional services to make sure that the plan is being operated within the law and provide the client with a written opinion or audit letter. I have performed audits of plans for clients where I reviewed plan procedures and complience with ERISA and IRC and issued written opinions even though there is no specific topic on the Bar exam for audits or pension plans for that matter. [i dont understand what you mean by stating that pension plan auditing is learned outside the CPA arena since the services will be performed as part of professional accounting/auditing services- I dont think a client would accept an audit if there was a disclaimer by the CPAs that the audit was outside their professional expertise.] Just because a topic is not tested on a professional exam does not mean that a professional cannot render an opinion on a matter within the scope of the professional's expertise.

[GBurns]

It is irrelevant what is offered in any state.

The issue is Why does 3515 think that only CPAs would or could offer the services?

Why not Lawyers or EAs?

In your post you stated that you have passed the Bar exam (and so I classify you as a Lawyer) and that you have done these audit. Why then would you not be qualified to answer the question that austin3515 asked, but a CPA is? Or are you inferring that you are inferior to a misc CPA in this area also?

My response points out that it is not within their area of study and not within the scope of the exam.

The fact that a CPA learns other things outside his required courses so as to complement and complete his professional knowledge has nothing to do with his designation.

Just as you pointed out, You yourself do perform audits although as you say "even though there is no specific topic on the Bar exam for audits or pension plans for that matter". Since it was not part of your Bar exam it most likely was not part of your required course of study. Yet you learned it and must have done it outside of your course of study and outside the scope of your exam. That is what you yourself just posted so it is puzzling that you state that "[i dont understand what you mean by stating that pension plan auditing is learned outside the CPA arena since the services will be performed as part of professional accounting/auditing services".

To understand what I said ALL that you have to do is to read your own post wherein you confirmed, restated and supported exactly what I said.

What a CPA or any professional tells his client about his area of expertise is up to that CPA or other professional's standards of ethics and disclosure. Noone telss any client whether they got a C or an A or had to repeat courses many times. It is just not something that is readily discussed. But discussion or disclosure does not change the facts.

[mbozek]

GB: Everytime I read one of you posts I feel like that duck in the AFLIC commercial after listening to Yogi Berra explain the benefits of having disability insurance.

[GBurns]

Remember that ducks do not speak (and reportedly do not understand)any of the human languages in real life so some people might or could misread your reference or analogy and equate you (intellectually) with the duck. I am sure that is not what you intended.

An easy way to solve your frequent problems of not understanding what the issues are and what other posters post, is just to sit back and reread each post before you make comments, especially your own posts which you never seem to really read before pressing Submit.

[Mike Preston]

In an attempt to bring some focus back to this discussion, I would like to ask GBurns a question:

Assuming that austin3515 is asking the question from the perspective of a CPA involved in auditing a plan, are you saying that the CPA has no responsibility to confirm that the distributions reported were, in fact, made as indicated because the CPA receives no formal training on this particular issue in preparation for the CPA exams? If not, and it is later determined that distributions were fraudulent, do you think that the CPA is held harmless because of the lack of that formal training?

[GBurns]

ALL my post asked was... "Why CPAs?"

In other simple words and as also asked.. Does austin3515 think that only CPAs can do these audits and why does he think that CPAs (as purely CPAs) are trained in this area?

I never said or insinuated that CPAs could not do this since they could have learned to do this outside of their CPA coure of study in the same way that mbozek learned outside the scope of study for his Bar exam.

To answer your post... ANYONE who does the audit (whether CPA, Lawyer or otherwise) is responsible to perform whatever it was they were contracted to do whether or not they received training in this area or not and SHOULD NOT ( which is what I think you meant to say) be held harmless because of any lack of training. You take the assignment you take the responsibility.

[Mike Preston]

I have never heard of anybody doing an audit for a qualified plan in connection with the filing of a Form 5500 who was not a CPA. Is that allowed?

[Guest qwert]

Why a CPA? ERISA 103(a)(3)(A), (D).

The fact scenario presented by the original poster involved embezzlement. I'm not a CPA, but I always thought that preventing embezzlement was a pri~~~~ job function of the profession.

Small plans (under 100 Ps) can be excused from this requirement if the assets are held by a bank. The 5500 instructions (Sched H in particular) will give more details.

Plans will often engage CPAs, lawyers, actuaries, and other consultants for so-called compliance audits. This is different from the CPA-audited financial statement required by Sched H. The compliance audit is not expressly required by ERISA, but may be a prudent thing to do. (Of course, the embezzlers of the world don’t tend to do this.)

[GBurns]

Mike,

Read the posts, there is no mention of a Form 5500.

qwert.

The post only posed a question ..."What are other CPA firms doing to establish the proper payee is receiving funds from distributions from retirement plans?" and agve examples asking What if? and How?.

There is no mention of embezzlement only of an audit to see what is happening. Embezzlement and forensic accounting etc is a whole nother issue.

BUT, you do raise the point that I was trying to raise when you stated

"Plans will often engage CPAs, lawyers, actuaries, and other consultants for so-called compliance audits." That is all that I pointed out... CPAs are not the only ones doing such audits therefore I asked .. Why CPAs only?

[Mike Preston]

Oh, I read it. And I guess I just jumped to the conclusion that austin was talking about an independent audit as required by ERISA. Guess we won't know until he or she decides to enlighten us. Just for kicks, how many audits as required by ERISA do you think there are in ratio to those that you seem to feel the OP was talking about?

[GBurns]

I never thought about it before and definitely not with regard to the OP.

I would say that it could be as much as 1,000 : 1 (OP audit), although I really should not venture even a guess without first knowing how many ERISA required audit there really are.

I do think that these OP type audits should be more frequent.

My experience is that I used to see a lot of these errors when I was active in Pension Plans. I now see a lot of fairly similar errors in almost every self-fubded health plan, at least 1 error in every 5,000 claims e.g wrong provided paid, wrong claim paid, wrong item paid, wrong amount paid etc etc.