How Audit Deficiencies Create Organizational Risk

ARTICLE | February 10, 2026

When your organization selects an auditor for your employee benefit plan, you’re making more than a vendor decision. You’re choosing a partner whose work directly impacts your regulatory compliance, fiduciary liability, and organizational credibility. Yet according to the U.S. Department of Labor’s (DOL) November 2023 Audit Quality Study, 30% of employee benefit plan audits contain one or more major deficiencies in the auditor’s work. For plan sponsors, that statistic should be a wake-up call.

The DOL study examined 307 employee benefit plan audits from the 2020 filing year and found that while overall audit quality has improved since 2015 (when the deficiency rate was 39%), a significant portion of audit work still falls short of professional standards. The implications for plan sponsors extend far beyond a technical compliance gap. When your auditor fails to perform adequate testing, document their work properly, or follow established auditing standards, your organization inherits the risk.

What Auditor Deficiencies Really Mean for Plan Sponsors

Auditor deficiencies identified by the DOL typically involve failures in areas unique to employee benefit plan auditing: insufficient testing of participant data, inadequate procedures for contributions and benefit payments, and incomplete documentation of audit work performed. These aren’t minor oversights. They represent situations where the auditor failed to gather sufficient evidence to support their opinion on your plan’s financial statements.

When an auditor issues an opinion without performing the necessary procedures, plan sponsors are left with a false sense of security. You may believe your plan’s financial statements are accurate and compliant, but the audit work underlying that opinion may be fundamentally flawed. If the DOL later reviews your audit and identifies these deficiencies, your organization faces several immediate consequences: additional scrutiny of your plan administration and questions about the adequacy of your fiduciary oversight.

The DOL study found that audit deficiencies are most common among firms that perform very few employee benefit plan audits each year. In fact, 70% of plan audits performed by firms that audit just one or two plans annually contained deficiencies. This data point reveals a critical pattern: auditors who lack specialized expertise and regular experience in employee benefit plan auditing are far more likely to produce substandard work. For plan sponsors, this means auditor selection carries significant risk. Choosing an auditor based primarily on cost or convenience, without evaluating their expertise and track record in employee benefit plan audits, can expose your organization to substantial downstream consequences.

The Broader Implications of Low-Quality Audits

Beyond the immediate regulatory concerns, auditor deficiencies create operational and reputational risk for plan sponsors. If your audit contains deficiencies that require corrective action, you may need to engage a different auditor to re-perform work, file amended returns, or provide additional documentation to regulators. These remediation efforts consume valuable time from HR, finance, and compliance teams who are pulled away from strategic initiatives to address problems that should have been prevented by competent audit work.

There’s also a fiduciary dimension to consider. Plan sponsors have a legal obligation under ERISA to prudently select and monitor service providers, including auditors. If your organization repeatedly engages auditors who produce deficient work, or if you fail to evaluate auditor qualifications meaningfully, you may be vulnerable to claims that you did not fulfill your fiduciary duties. The DOL study reinforces that audit quality varies dramatically across firms, and plan sponsors cannot assume all CPA firms are equally qualified to audit employee benefit plans.

The study also revealed that firms participating in the AICPA Employee Benefit Plan Audit Quality Center (EBPAQC) performed higher-quality work than nonmember firms. This finding suggests that auditor commitment to specialized training, peer consultation, and quality control processes directly impacts audit outcomes. Plan sponsors who ask about these affiliations and quality practices during auditor selection are better positioned to avoid the risks associated with low-quality audit work.

Making Auditor Selection a Risk Management Priority

The DOL data makes clear that not all employee benefit plan audits are created equal. Plan sponsors can take several practical steps to reduce their exposure to auditor deficiencies. First, evaluate auditor qualifications carefully. Ask prospective auditors how many employee benefit plan audits they perform annually, whether they participate in the EBPAQC, and what specialized training their engagement team receives. Firms that perform a high volume of employee benefit plan audits and invest in ongoing education are statistically more likely to produce quality work.

Second, don’t make auditor selection decisions based solely on cost. The lowest bid may come from a firm with limited experience in employee benefit plan auditing, and the long-term cost of remediating deficient audit work can far exceed any initial savings. Third, monitor your auditor’s performance over time. If your audit consistently requires significant adjustments, if deadlines are missed, or if your auditor seems unfamiliar with employee benefit plan-specific requirements, those are red flags worth addressing.

Finally, recognize that selecting a qualified auditor is part of your fiduciary responsibility. Documenting your evaluation process, the factors you considered, and why you concluded your selected auditor was qualified demonstrates the kind of prudent decision-making that ERISA requires.

A Foundation Built on Audit Quality

Audit deficiencies don’t just reflect on the auditor. They create real risk for plan sponsors who rely on audit opinions to meet regulatory requirements and make informed decisions about plan administration. By understanding what the DOL’s audit quality data reveals and adopting a more rigorous approach to auditor selection and oversight, plan sponsors can protect themselves from the compliance, operational, and fiduciary risks arising from low-quality audit work.

At Insero, we recognize that employee benefit plan auditing requires specialized expertise, rigorous quality controls, and a commitment to staying current with evolving standards. Our team focuses specifically on employee benefit plan audits and brings the depth of experience and technical knowledge necessary to deliver audit work that meets the highest professional standards. We understand that plan sponsors depend on our work to fulfill their fiduciary obligations, and we take that responsibility seriously.

If you’re evaluating your current auditor relationship or want to discuss what high-quality employee benefit plan audit work looks like, we invite you to connect with our team. Let us show you what it means to work with auditors who deliver solutions that inspire confidence.

Contact Insero today to speak with one of our employee benefit plan audit specialists.