Independent qualified public accountants for audit

[Guest 401kadmin]

I am finding conflicting information on the definition of an independent qualified plublic accountant.

Is it at all feasible that a CPA firm that provides TPA services for the plan sponsor also perform the IQPA audit? It seems logically, the answer is no. How is it possible to remain "independent" if the firm is also providing TPA services? 29 CFR 2509.75-9 addresses the guidelines for determining when a QPA is independent, however, as I am not a CPA, the terminology used in the bulletin doesnt seem very clear to me. Any input would be helpful.

[JanetM]

If the TPA is preparing financial stmts for the Plan they can not audit the plan.

[Guest 401kadmin]

I read something about that in the bulletin, however, I am not certain I understand exactly what are financial statements, would this include balance sheets reconciling all trust assets?

[Guest Dell]

It would be difficult for an accountant acting as a TPA to remain independent. If the accountant is maintaining accounting records for the plan, which the TPA would normally be doing, they cannot be independent. If they are making management decisions on behalf of the plan, they will not be independent. It goes on and on.

[JanetM]

Statements would be Statement of Net Assets Available for Benefits (balance sheet) and Statement of Changes in Assets Available for Benefits (income statement). If TPA prepares these they should not also be auditing them.

[wsp]

Statements would be Statement of Net Assets Available for Benefits (balance sheet) and Statement of Changes in Assets Available for Benefits (income statement). If TPA prepares these they should not also be auditing them.

I would hope that it would actually be more than just the preparation of the statements. If that's the case then I can farm that task out to another firm for $100. Seems to me that if we engaged in any action that directly impacted one of those line times then we would also be precluded from acting as an auditor (distribution processing, contribution calculation, earnings allocation, forfeiture allocation etc.)

[BeckyMiller]

The DOL guidance on auditor independence is found at 2509.75-9. This is the basis for the comments above that the auditor may not maintain the books are records. Assembling existing financial information into proper format is not necessarily a violation, though the SEC does see it as such for 11-k filings. The AICPA rules of conduct are somewhat more flexible on what constitutes "maintaining" books and records. But the DOL is on record, at least orally, that they do not like the AICPAs standard in this regard.

The DOL recently requested feedback from the ERISA community on the appropriate nature of auditor independence. See http://www.dol.gov/ebsa/regs/fedreg/proposed/2006014913.htm

[Guest Dell]

I agree with Becky's post above. Although DOL's rules are more restrictive than AICPA's I believe auditors' may assist in the assembly of the actual financial statements. We cannot maintain books or records, make participant account allocations etc., but simply preparing the actual statements from the clients books and records is not prohibited.

[Dan]

Our firm is a provides broad services to our clients, which includes plan administration and qp audits. We take the position that record keeping a plan doesn't necessarily disqualify the firm from doing the audit. In some cases we also provide investment advice, which does disqualify the firm from doing the qp audit. We do not custody any assets nor handle any funds. The custodian handles investments and reporting at the plan level. And they send trust statements to the client and us. We do the traditional TPA work.

Not all of our peers agree with our position. We agree it is aggressive, but not unreasonable. And we have had the DOL audit plans that use us for record keeping and qp audits. This arrangement has never been a problem for them. We also recognize that this position isn't universally accepted. It may happen that further guidance may indeed make this position unacceptable. At that point, we will discontinue this practice.

[Archimage]

I have heard others argue that you could do it as well. To me the DOL regs are very clear:

...an accountant will not be considered independent with respect to a plan if: 3) An accountant or a member of an accounting firm maintains financial records for the employee benefit plan.

It seems crystal clear to me.