The employee benefit plan is a compensation or pension plan granted by an organization to its employees. The Employee Retirement Income Security Act (ERISA) mandates that every employee benefit plan be audited in order to establish credibility and ensure compliance with applicable laws and regulations.
The audit process for EBP financial statements can be quite complex, plan sponsors need to select the right audit firm in Dubai. Throughout this guide, you will find answers to your questions regarding EBP, including how the audit process works, who is involved in the process, and what are the few top audit firms in Dubai.
How Does an Employee Benefit Plan Audit Works?
During an EBP audit, it’s important to ensure your engaged audit firm checks whether the financial statements involve any misstatements resulting from fraudulent reporting or unintentional mistakes. Based on this, the auditor provides a report to the Department of Labor regarding the financial statements.
The Department of Labor (DOL) is responsible for reviewing the ERISA audits, and in any case, if the company delays its audit process or the audit accounts for a lack of skepticism, the DOL has every right to issue a fine to the company.
The functional fiduciary responsibility of the plan sponsor or employer is to conduct the plan advantageous to the participants or employees.
Audit procedures must:
- Ensure the plan sponsor fulfills their fiduciary responsibilities
- Identify and correct misstatements and potential fraud risks
- present adequate understanding of internal control processes
What Are the Requirements for an EBP Audit?
To provide the DOL with financial information, a company must file Form 5500 every year. Based on the number of participants, you will need to choose either a large plan or a small plan that may or may not require an audit.
The Employee Retirement Income Security Act (ERISA) sets up guidelines that will help you determine whether an audit is required for your Employee Benefit Plan.
The general requirement is to have over 120 or above participants at the beginning of the EBP plan year to file a large plan that requires an audit.
If the number falls below 120, then a small plan can be filed for your Form 5500 which doesn’t require any audit.
However there as well are other exceptions to consider depending on whether the plan is funded or not such as the 80-120 rule.
80 – 120 Rule
This rule can help small or medium-sized businesses to grow their business. If you filed a Form 5500 in the prior year either as the small plan or large plan, in the current year you can carry out this form even if the number of participants ranges from 80-120.
What is the Importance of an EBP Audit?
The primary outline of this plan is to protect the participants as well as to help grow the company. The EBP audit is a valuable opportunity to build strong relationships between the company and its employees and it encompasses the following benefits.
- Employee benefit plans can help multinational companies in dealing with the insurance of their employees.
- With audit results, more accurate evaluations can be made in financial reporting.
- Every piece of information gained through this plan can target key areas to streamline employee benefits, thus making the operation efficient.
- Companies can identify their areas of strengths and weaknesses and assist them in ways to run more efficiently.
Top audit firms in Dubai
Choosing the right audit firm in Dubai that specializes in identifying potential problems and creating a quality audit will not only help protect the employee’s assets but also help to file an accurate annual audit for your plan.
Hiring an independent certified public accountant (CPA) in Dubai to assess your financial audits is essentially a safeguard. This certification will ensure that your auditor keeps check of current audit affairs as well as is experienced and familiar with operations and special standards that apply to the Employee benefit plan.
Every three years the Employee benefit plan Audit Quality Centre AICPA’s members have one of their audits subject to a “Peer Review check” by a CPA firm. The AICPA ensures that CPA firms are following professional auditing standards.
Conclusion
Once every year companies able to file Form 5500 or comply with 80 – 120 rules are required to perform the audit as stated by the DOL and ERISA. If in case of delayed performance or discrepancies, the DOL can issue penalties. This is why finding the right approved auditor in Dubai is an important matter and after reading this guide, it’ll be an even easier task for you.
