M5:

Question 1

Establishes financial accounting and reporting standards for the financial statements of defined benefit pension plans

Answer 1

FASB ASC Topic 960

Question 2

A voluntary membership organization for firms that perform benefit plan audits

Answer 2

Employee Benefit Plan
Audit Quality Center (EBPAQC)

Question 3

Establishes financial accounting and reporting standards for Defined Contribution plans

Answer 3

FASB ASC Topic 962

Question 4

Daily penalty and maximum penalty for deficient/missing information on the required audit report

Answer 4

up to $1,100 per day with a $50,000 per annual 5500 filing

Question 5

Establishes accounting and financial reporting standards for health & welfare benefit plans

Answer 5

FASB ASC Topic 965

Question 6

Communication at the end of an engagement, where the auditor engages those charged with governance and who have appropriate responsibilities for the financial statements and knowledge of their related plan matters.

Answer 6

Management Representation Letter

Question 7

The illegal use of property or funds of an individual for another’s own use or other unauthorized purpose

Answer 7

Misappropriation

Question 8

When financial statements are compromised in an attempt to deceive plan participants

Answer 8

Financial Statement Fraud

Question 9

Studies by this organization identified the most common methods for detecting fraud

Answer 9

Association of Certified Fraud Examiners (ACFE)

Question 10

Departments where fraud is most likely to occur

Answer 10

Accounting, Operations, & Upper
Management

Question 11

Results of the 2014 DOL Audit Quality Study

Answer 11

4 out of 10 audits (40%) had Unacceptable–Major deficiencies

Question 12

As part of the DOL, they oversee the quality of benefit plan audits by CPAs

Answer 12

Employee Benefits Security
Administration (EBSA)

Question 13

Document to a client from an independent qualified public accountant to establish and document an understanding regarding the services to be performed at the beginning of a plan audit

Answer 13

Engagement Letter

Question 14

Three levels of severity of a deficiency

Answer 14

1. Material Weakness
2. Significant weakness
3. Other weakness

Question 15

Entity responsible for understanding
the objective of the plan audit

Answer 15

Plan Management

Question 16

Entity that does not have the right to examine an auditor’s work papers

Answer 16

Plan Administrator

Question 17

The most effective fraud detection tool available

Answer 17

Whistleblower Hotline

Question 18

Entity responsible for expressing an opinion on a plan’s financial statements

Answer 18

Plan Auditor

Question 19

Departments where fraud occurrences are low

Answer 19

Human Resources, Boards of
Directors, & Legal

Question 20

Which severity of weakness is the most significant and deals with internal controls

Answer 20

Material Weakness

Question 21

Severity level deals with internal controls but is not the most significant

Answer 21

Significant Weakness

Question 22

Severity level that is not significant or material

Answer 22

Other Weakness

Question 23

3 common deficiencies that plan auditors commonly communicate to management

Answer 23

1. Internal plan processes
2. Regulatory requirements
3. Outside service providers

Question 24

3 common deficiencies with internal plan processes include

Answer 24

1. Processing of participant contributions
2. Participant loan repayment
3. Hardship withdrawals

Question 25

One of the most common deficiencies required under ERISA, section 408 (b)(2)

Answer 25

Lack of proper monitoring of service provider fees and disclosures

Question 26

A report on the effectiveness of an organization’s internal controls and safeguards they have in place while providing independent and actionable feedback. Financial statement auditors use them to reduce audit procedures.

Answer 26

SOC 1 Report

Question 27

Allows plan management to determine whether the plan sponsor has effective controls to ensure 1) the proper and complete transmission of data, 2) proper processing of data and complete receipt of data, and 3) timely reconciliation of data received.

Answer 27

What a SOC 1 Report does

Question 28

The goal of this is to enhance the quality of audits of ERISA plans by prescribing certain procedures that are required to be performed in the audit. Also looks to add transparency to the nature and scope of audits as presented in the auditor’s report.

Answer 28

SAS 136

Statement on Auditing Standards No. 136

Question 29

1) Clarity of the respective responsibilities of auditors and plan sponsor’s fiduciaries and administrators
2) Auditor’s responsibilities must now be disclosed on the auditor’s report
3) Management’s responsibility to maintain a plan instruction, administer the plan, and maintain sufficient records for plan transactions and benefits

Answer 29

Changes brought by SAS 136

Question 30

Limits independent auditors from auditing investment information that a qualified institution prepares and certifies. Only the plan administrator can instruct the auditor to not perform any auditing procedures on the certified investment information

Answer 30

Limited Scope Audit

Question 31

SAS 136 renamed the limited scope audit to what ERISA Section

Answer 31

ERISA Section 103(a)(3)(c)

Question 32

3 main risk factors most likely to create fraud

Answer 32

1. the presence of incentives or pressures to commit fraud
2. opportunities to carry out the fraud
3. attitudes and rationalizations to justify the fraud

Question 33

Internal audit, management review, reconciliations, external audit, surveillance and confessions are all examples of

Answer 33

the most common fraud detection methods identified by the ACFE

Question 34

Contains 3 statutes that directly address violations involving employee benefit plans:
1) Embezzlement
2) False statements or concealment of facts in relation to documents required by ERISA
3) Offer, acceptance, or solicitation to influence operations

Answer 34

Title 18 of the U.S. Criminal Code

Prosecutions are handled by U.S. Attorney’s offices

Question 35

Examples of this include:
*Implementing whistleblower hotlines
* Provide employee support programs
*Provide codes of ethics and ethics training
*Ensure all employees understand what constitutes fraud - implement a zero tolerance policy

Answer 35

Ways to deter or minimize fraud

Question 36

1. Magnitude of violation
2. Desirability and likelihood of incarceration both as a deterrent and as punishment
3. Whether the case involves prior ERISA violator

Answer 36

Examples of decisions to seek criminal action

Question 37

Who is responsible for ensuring that auditors have access to all plan documents and to continuously monitor the plans for appropriate handling?

Answer 37

Plan Fiduciary