Audits of Employee Benefit Plans Need to be Strengthened

GAO discussed independent public accountants' (IPA) role in auditing employee benefit plans covered by the Employee Retirement Income Security Act of 1974 (ERISA). GAO found that: (1) over the past year, several groups have identified oversight and enforcement of employee benefit plans as an area subject to high risk; (2) the Department of Labor and the Internal Revenue Service (IRS) are responsible for enforcing ERISA; (3) despite Labor's efforts to correct weaknesses, many problems remain; (4) IRS has increased its examinations of employee plans, but places little emphasis on plans that are or may be underfunded and pose a risk to participants; (5) Labor officials said that more than 40 percent of benefit plan assets in a random sample of plans were not audited because of scope exclusion; (6) neither plan administrators nor IPA auditing the plans are required to report on internal controls and compliance with laws and regulations; (7) there is no clear requirement for reporting for regulators; and (8) IPA are not required to obtain peer review of their practice. GAO believes that: (1) the scope exclusion should be repealed to require IPA to audit all benefit plan assets; (2) plan administrators should be required to report on plans' internal controls and complaince with laws and regulations; (3) IPA should be required to report directly and promptly to regulators on employee benefits plan fraud and other violations when plan administrators fail to report such problems; and (4) IPA that audit employee benefit plans should submit to peer review.