How "independent" does an accountant have to be to do an aud

[pbarrett]

We have a client who will need to have an audit done. The client (employer) would like to engage the CPA firm that handles the corporate books. Is that permissible? Also, does it matter if we prepare the 5500 and schedules or the can the auditor? I called a couple of firms in our area known for doing plan audits and one quoted a bid that included the completion of the forms and attachments and the other firm said it was our job to do the 5500 and they simply do the attachment. Does it really matter? As you can tell, we normally only handle plans with less than 50 participants so this is all new to me. Thanks for any info.

[Guest Rudy]

It is completely acceptable for the same CPA firm that handles a company's books to audit the 5500. In fact, the majority of our clients have the same accounting perform each function.

In our shop, we prepare the 5500 and all related schedules. It is then forwarded to the accountant for audit review. The only attachment from them is a copy of their audit report.

I cannot believe an accounting firm would suggest preparing a form that they will be auditing. It has been a few years since I was an auditor, but examining a form you completed is an obvious conflict. In this case, I would suggest that there would be no "independence" as far as the examination is concerned.

[Guest Emiliano]

CPA Firms regularly prepare 5500s and provide an audited opinion on the attached financial statements. This is not in conflict with DOL's stance on independence outlined in 29 CFR 2509.79-9.

[Guest RBeck]

independence has to do with the recordkeeping function as well. Ian Dingwall has stated that an auditor is not independent if it does the plan's recordkeeping AND the plan's financial audit. Preparing Form 5500 is an extension of the audit function, not a conflict with it.

[david rigby]

I disagree with RBeck's last sentence, especially his choice of verb "is". Filing of the 5500 is a task related to the plan and the sponsor. It is not part of the audit. However, it might be a task related to the audit.

In my experience, 5500's prepared by others (whether the sponsor or an independent TPA) are usually reviewed by the auditor before filing. That does not make it a part of the audit, but rather takes the practical step of making sure that the information in the form does not conflict with the auditor statement.

[Guest RBeck]

pax, you're right. What I meant by my statement is that there is no conflict if the auditor prepares the 5500 as a part of the audit - having worked for a CPA firm we did prepare many 5500s for audit clients, based on information provided by the client with regard to the non-financial aspects of the 5500. I am not a fan of changing the 5500 to agree with the financial statements, I prefer a footnote reconciling the differences - I think that's a much more prudent course of action - an auditor who (that) changes a 5500 may be taking on a responsibility for something beyond the scope of the audit depending on the scope of the audit outlined in the engagement letter.[Edited by RBeck on 08-02-2000 at 02:14 PM]