This is part three of a four-part series on the DOL's Audit Quality Initiative. For even more on how the initiative impacts you, be sure to download your free copy of our in-depth white paper, More than a Nudge.
Evaluating responses to your plan auditor request for proposals can be done simply and efficiently if you lay out the criteria you consider most critical in advance and assign a weight in terms of importance to each. This approach creates a framework of objectivity before you begin reviewing the proposals.
Each evaluator should assign their own weighting to each criterion rather than for the group to come up with a common weighting. We have found that this allows each evaluator’s perspective to be aired during discussions with the candidates and the evaluation team.
For example, if working directly with a partner with extensive EBP audit experience is highly valuable from one evaluator’s perspective they might give that criterion a weight of 3 on a weighting scale of 0 (no importance) to 3 (extremely Important). For another, it may be fine to have an associate or staff person conducting the actual onsite work, perhaps because the hourly cost is much lower, so they might weight the same criterion 1 (somewhat important) or 2 (important). In our experience, it’s critical to a successful process for those differences in view to be identified and considered, especially as elimination or selection of candidates for interview is determined.
We suggest you also determine if there are any “non-starters” in the criteria that would eliminate a candidate regardless of how it responds in other areas. For example, some obvious “non-starters” might be:
- Not being licensed in the state in which your organization is domiciled for tax reporting purposes
- Having a history of DOL audit quality findings or referrals
- Having had ethics or other negative referrals by a State CPA Society or AICPA
- A history of or current litigation, esp. in the EBP audit area
Less obvious “non-starters” could be:
- Not being a member of AICPA’s Employee Benefit Plan Audit Quality Center
- A very short history or EBP audits by either the firm or the partner-in-charge of this area of the practice
- Inability to demonstrate significant EBP audit specific training for partners and staff
You will also need to determine the scale you will use for scoring. We have developed a system that uses either a five or ten point scoring scale for 12-15 criteria that works very well with the wide range of plan sponsors we work with. The point is to create, execute and document a thorough process for evaluating and screening candidates so that you can legitimately narrow the field with whom you will meet and from whom you will select your auditor.
In our next, and last, post in this series, we discuss how to evaluate fees in choosing an audit firm. Don't miss a post! Subscribe to our blog in the sidebar.