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Case of the Week: What Standards Apply for Form 5500 Audits?

The ERISA consultants at the Learning Center Resource Desk, which is available through Columbia Threadneedle Investments, regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans. A recent call with an advisor in Pennsylvania is representative of a common inquiry regarding the audit requirement for plans that file Form 5500. The advisor asked:

“For qualified retirement plans that are subject to an audit by an independent qualified public accountant (IQPA) as part of Form 5500 filing requirements, what audit standards apply?”

  • Sponsors of plans subject to a Form 5500 audit have a fiduciary responsibility to prudently select the IQPAs they use. (Although there are exceptions, generally, federal law requires employee benefit plans with 100 or more participants to have an audit as part of their obligation to file the Form 5500 Series). Incomplete, inadequate, or untimely audit reports may result in penalties for the plan sponsor. The DOL has a booklet sponsors can refer to, "Selecting an Auditor for Your Employee Benefit Plan."

  • IQPAs must perform their ERISA plan audits using three sets of auditing standards: the Generally Accepted Auditing Standards (GAAS), the Generally Accepted Accounting Principles (GAAP) and the Employee Retirement Income Security Act of 1974 (ERISA) reporting and disclosure requirements as defined by Department of Labor (DOL) regulations.

  • GAAP and GAAS standards are set by the Financial Accounting Standards Board (FASB) and the American Institute of Certified Public Accountants (AICPA). The DOL plays no role in establishing GAAP and GAAS standards.

  • ERISA’s reporting and disclosure requirements are found at ERISA §103(a)(3)(A) and DOL regulation 29 CFR 2520.103-1(b).

  • In 2015, the DOL released a report, "Assessing the Quality of Employee Benefit Plan Audits," in which it summarized the results of a study on the quality of IQPAs’ audits of ERISA-covered employee benefit plans. The study showed that 39 percent of the audits contained major deficiencies with respect to one or more relevant GAAS and/or GAAP requirements. The leading GAAS and GAAP failures were:

— inadequate footnote disclosures;
— inappropriate presentation of financial information on financial statements;
— lack of ASC 820 Fair Value Measurement disclosures;
— report not modified for lack of ERISA schedules;
— opinion does not extend to all financial statements and/or years presented; and
— failure to refer to supplemental information (e.g., ERISA required schedules).

  • Furthermore, 17% of the audit reports failed to comply with one or more of ERISA’s reporting and disclosure requirements. The areas of ERISA noncompliance related to:

— not attaching the supplemental schedule(s) required;
— incomplete or missing footnotes to the plan’s financial statements;
— the IQPA did not manually sign the report; and
— failure to report delinquent employee contributions.


The audit performed by a IQPA is an essential fiduciary element. Plan sponsors should pay keen attention and document their adherence to the DOL’s suggestions on selecting IQPAs for their plans.

The Learning Center Resource Desk is staffed by the Retirement Learning Center, LLC (RLC), a third-party industry consultant that is not affiliated with Columbia Threadneedle. Any information provided is for informational purposes only. It cannot be used for the purposes of avoiding penalties and taxes. Columbia Threadneedle does not provide tax or legal advice. Consumers consult with their tax advisor or attorney regarding their specific situation.
Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Columbia Threadneedle.

Columbia Threadneedle Investments (Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies.

©2016, Columbia Management Investment Advisers, LLC. Used with permission.