From planning the audit to issuing financial statements, there are various communications provided to those charged with governance of the employee benefit plan by the plan auditor. “Those charged with governance” are identified as the plan’s board of trustees, the plan administrator or both, and depending on the structure of the organization, essentially anybody who would be considered to have a fiduciary responsibility to plan. These communications include the engagement letter, management representation letter and communications about internal control-related matters.
These communications, while having various purposes, can help those charged with governance meet their fiduciary responsibilities to plan participants, an increasing area of focus for the Department of Labor (DOL). By fiduciary responsibility, the DOL means properly maintaining the financial books and records of the plan, as well as filing a complete and accurate return for the plan on a timely basis. Auditor communications can improve how these responsibilities are met by identifying internal controls that need improvement in order to better prevent, detect and correct errors and fraud, recommending improvements to internal controls and helping assess the costs and benefits of implementing those control improvements. They also assist those charged with governance in understand the services being provided by auditors.
By using these communications in the correct manner, those charged with governance can better meet their fiduciary responsibilities to plan participants, and improve efficiency and effectiveness of internal controls.
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