With new professional standards soon to be finalized, auditors are working on a plan to improve the quality of employee benefit plan audits.

The Auditing Standards Board at the American Institute of Certified Public Accountants is preparing to finalize a statement on auditing standards that is meant to beef up the auditor’s responsibilities when issuing an opinion on benefit plans subject to the Employee Retirement Income Security Act of 1974. Where the assets in a public company’s benefit plan are based in stock, the plan is likely also subject to the standards of the Public Company Accounting Oversight Board, says Beth Garner, assurance partner and national practice leader for employee benefit plan audits at BDO USA.

The AICPA’s proposed new standard includes new requirements for auditors to accept engagements and new requirements with respect to risk assessment and response. It gives auditors new marching orders in terms of communicating with those charged with governance over benefit plans, and it includes new audit procedures and new considerations for the Form 5500 filing.

The Department of Labor (DOL) has been monitoring the audit quality of benefit plan auditing for several years, and it issued a report in 2015 calling on auditors to make improvements. The DOL said it found 40 percent of audits contained “major deficiencies” with respect to at least one generally accepted auditing standard that would lead to a rejection of a Form 550 filing, which is an information filing required by the DOL, the Internal Revenue Services, and the Pension Benefit Guaranty Corp.

The DOL’s study noted a “clear link” between the number of audits a given firm performs and the level of deficiencies. Firms performing the fewest audits earned a 76-percent deficiency rating, the DOL said.

By contrast, firms that performed the most plan audits had a deficiency rating of 12 percent. A further indictment on auditors, the DOL also said the profession’s peer review practices did little to flag any kind of problem.

The new standards will compel auditors to do more work to arrive at clean audit opinions, especially with respect to plans that are managed by firms regarded as heavily regulated under ERISA. To some extent, the new standard will codify measures many auditors are already taking, says Garner. Nevertheless, the upgraded standards will be good news for auditors and employee benefit plan sponsors alike, she says. “This is exciting for us because it does clearly state certain things you have to do,” she says. “Certain things will stay the same, but it outlines more responsibility.”