Employee benefit plan (EBP) audits are a required service for plan sponsors, but for CPA firms performing fewer than five per year, the compliance risks, training costs, and DOL scrutiny may outweigh the rewards.
This blog breaks down the real pros and cons of maintaining an EBP audit practice at low volume, explores how automated EBP audit tools are changing the game, and helps small-to-mid-sized CPA firms decide whether to keep, refer, or outsource this service entirely.
What you'll learn in this section: The basics of EBP audits, who requires them, and why regulators are paying closer attention than ever.
Employee benefit plan audits are independent financial audits required for plans - think 401(k)s and pension funds - that exceed a certain participant threshold. Under ERISA, most plans with 100 or more eligible participants must file a Form 5500 annually, and that filing typically requires a CPA-conducted audit.
The goal is straightforward: ensure that employee retirement benefits are being properly administered and that plan assets are accurately accounted for. What's less straightforward is how demanding these audits have become to execute correctly.
The U.S. Department of Labor (DOL) has repeatedly found that CPA firms performing only a handful of EBP audits per year consistently produce the most audit deficiencies. In a widely cited DOL report, firms with smaller EBP audit practices had the highest non-compliance rates across Form 5500 filings, raising red flags for regulators and clients alike.
For firms doing dozens of these audits annually, the infrastructure, training investment, and AICPA membership in the Employee Benefit Plan Audit Quality Center make sense. For firms doing three or four a year? The math gets much harder.
What you'll learn in this section: How technology is changing EBP audit workflows, and where it still falls short.
Automation has entered nearly every corner of public accounting, and employee benefit plan audits are no exception. Today's automated EBP audit platforms promise to speed up data collection, flag compliance anomalies, and reduce the manual burden of audit prep.
For firms performing a moderate volume of EBP audits, these tools can meaningfully improve efficiency. But for firms doing only a few per year, automation alone doesn't solve the core problem: depth of knowledge.
Here's why:
Automation is a productivity multiplier, not a competency replacement. If the foundational knowledge isn't there, the tool can create a false sense of security.
What you'll learn in this section: An honest, side-by-side breakdown of why some firms keep EBP audits and why others are walking away.
What you'll learn in this section: The specific quality and compliance gaps that separate low-volume EBP practices from specialized ones.
Volume is a proxy for expertise in EBP audit work. A firm performing 30 or more EBP audits per year builds institutional knowledge that a low-volume firm simply cannot replicate - no matter how capable the individual CPA may be.
High-volume EBP audit practices typically have:
Low-volume practices, by contrast, often rely on generalists rotating through EBP engagements once a year. The result, as DOL data has confirmed, is a significantly higher rate of audit deficiencies and the associated liability that comes with them.
This isn't a critique of the CPA's skill. It's a function of how specialized EBP audit compliance has become.
What you'll learn in this section: A practical alternative that lets CPA firms preserve client relationships without absorbing the compliance risk.
Referring EBP audits to a specialized firm doesn't mean losing the client. It means protecting them and your firm by ensuring the work is handled by someone with the depth of practice to do it right.
Several structured referral arrangements allow the originating firm to:
This model works particularly well for CPA firms focused on tax, advisory, or niche industry services that serve clients who happen to grow into the EBP audit requirement.
Employee benefit plan audits are high-stakes work. The DOL doesn't grade on a curve for low-volume firms, and neither do plan sponsors when penalties arrive.
If your firm is performing fewer than five EBP audits per year, the honest question to ask is: Are we actually equipped to do this well? Not just adequately, but well enough to hold up under DOL review, year after year, as standards continue to tighten.
Keeping the work without the volume or infrastructure is a reputational risk dressed up as client service. Referring the work to a specialized firm - while maintaining the primary client relationship - is increasingly the sharper, more defensible business decision.
Automated EBP audit tools, AICPA resources, and specialized partners all exist to help CPA firms serve clients better. Using them strategically, including knowing when to hand off a specific engagement, is exactly what strong advisory relationships look like.
Most accounting professionals and AICPA guidance suggest that firms performing fewer than five employee benefit plan audits per year face a difficult cost-benefit equation. The combination of training costs, DOL compliance requirements, and staff time rarely produces healthy margins at low volume. Firms that want to maintain the practice should aim to build sufficient volume, generally 10 or more per year, to justify the infrastructure investment. Otherwise, referring the work to a specialized firm is often the more sound professional decision.
A deficient EBP audit can have serious consequences for both the plan sponsor and the auditing firm. Plan sponsors may face DOL penalties ranging from $50 to more than $1,000 per day for each day the Form 5500 filing is late or incomplete. For the CPA firm, a deficient audit can result in DOL investigations, peer review issues, and significant reputational harm with the affected client. The risk is compounded for firms without dedicated EBP audit teams, where oversight and documentation standards may not meet current DOL expectations.
Automated EBP audit platforms can significantly reduce the time spent on data collection, reconciliation, and compliance checklists. However, they do not substitute for the judgment that comes from regularly performing these audits. Regulations under ERISA, the IRS, and the DOL change frequently, and auditors must understand how those changes affect specific plan types. Technology accelerates the process for experienced practitioners, but it cannot compensate for limited exposure to the nuances of employee benefit plan audits.
The AICPA Employee Benefit Plan Audit Quality Center (EBPAQC) is a voluntary membership organization for CPA firms that perform EBP audits. Member firms commit to meeting specific quality standards, including having a designated partner responsible for EBP audit quality, completing required continuing education, and undergoing regular peer reviews focused on EBP audit work. Membership signals to clients and regulators that the firm takes EBP audit quality seriously. For firms not yet at the volume to justify EBPAQC membership, that's often a signal to reconsider whether to offer the service at all.
Frame it as a client-first decision. Most clients are more concerned with getting a clean, penalty-free Form 5500 filing than they are with which CPA firm technically performs the audit. A firm can explain that the EBP audit will be handled by a specialized practice, while the referring firm continues managing the client's tax and advisory needs. A signed non-solicitation agreement with the receiving firm ensures the client relationship stays intact. Transparency builds trust, and clients generally respond well when their CPA proactively manages risk on their behalf.
Christopher is the Director of Client Relations and Business Development at MYCPE ONE, a leader known for his energy and people-first approach. Chris leads from the front mentoring teams, driving growth, and building lasting client relationships. With over a decade of experience in sales, coaching, and business strategy, he has helped 5,000 CPAs nationwide overcome challenges and discover new opportunities. Chris is a familiar presence at major accounting conferences, representing MYCPE ONE and shaping meaningful industry partnerships. Passionate about leadership and professional growth, he continues to inspire teams and professionals to reach their highest potential.
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