Same firm as TPA and IQPA CPA?

[justanotheradmin]

Has anyone seen any guidance from the DOL on what "financial records" means as it relates to item 3) in the DOL bulletin on independence?

http://www.gpo.gov/fdsys/pkg/CFR-2011-title29-vol9/pdf/CFR-2011-title29-vol9-sec2509-75-9.pdf

I've been reading some of the material here:

http://www.aicpa.org/interestareas/employeebenefitplanauditquality/resources/accountingandauditingresourcecenters/auditorindependence/pages/auditorindependenceresource%20center.aspx

and it seems the AICPA might take a rather narrow view of what financial records means. But I am not a CPA, so maybe this is typical?

A plan is looking to bid out its TPA services, and one of the companies submitting a proposal is the CPA firm that provides the IQPA services for the plan since it is audit sized. The plan is wondering if it is a problem that the auditing firm would also be the firm to provide administration services. The TPA firm has clarified that they would not be providing recording keeping, just things like 5500 preparation, compliance testing, distribution assistance, etc.

Maybe I am over thinking this. but I was wondering if I could get people's thoughts since in my experience small TPA firms shy away from providing audit services and small CPA firms shy away from providing TPA services on plans that they audit, because it violates the DOL rules.

Can anyone clarify?

[ESOP Guy]

I am doing this from memory not recent research. I am a CPA and I once worked for a regional CPA firm that had a TPA business and a rather good size plan audit business. We NEVER did TPA services for a plan that was audited EXCEPT prepare the Form 5500 and 8955-SSA. This firm was sticklers about compliance but more then happy to earn more if it could. My understanding was it was an independence issue is why the two didn't overlap more. Not sure if it was AICPA ethics or DOL rules. But it shouldn't matter either one should stop a CPA firm as an AICPA ethics violation often times is by definition a violation of related state law.

I don't know how they can both audit distributions which is part of every plan audit I have seen and help process them.

[justanotheradmin]

Thanks ESOP guy, sounds like your experience is in-line with what I thought was common.

The distribution question is one that came up already, but I don't have an answer to as to how involved they are in that process.

Could someone correct me if I'm wrong, but I thought part of the audit process was to look at the plan's processes and procedures, including those of the service providers, hence the need for a SAS70 or processes/procedures questionnaire in lieu of a SAS70.

In this circumstance, wouldn't the CPA be auditing its own firm's practices as they relate to services on the retirement plan? The CPA firm is a good sized local company, not tiny, but even if there is clear delineation between departments, I don't see how that makes it independent under the DOL rules. There would be a huge chance for bias, and inadvertent partiality, no?

Am I misunderstanding the processes/procedures portion of the audit? Maybe the SAS70/questionnaire doesn't actually do much good?

I am probably beating a dead horse.

[Flyboyjohn]

The sizeable CPA firm (top 40 in the country) I worked at for 27 years struggled mightily with this issue.

For 10-15 years we would take both the TPA & IQPA engagements and felt we had a defensible position since on the TPA side we weren't doing "recordkeeping" (plans were always in an investment & recordkeeping platform) and we had a Chinese wall between the TPS folks and the auditors.

We finally concluded that it was too risky (at the urging of Ian Dingwall, the Chief EBSA Accountant)so we stopped doing both about 10 years ago.

But I can't point to anything that says flat out you can't do it and would defend to the death (for a substantial fee of course) a CPA firm who's independence was being challenged by Dingwall or AICPA.

FWIW