DOL Denounces Limited Scope Audit & Reiterates ESOP Fiduciary Intent
As part of the AICPA Employee Benefits Conference the DOL reiterated their desire to impose a potential legal liability on financial advisors (i.e. ESOP appraisers) and specifically mentioned ESOPs as an audit priority. They also provided an update on the timing of the DOL Re-Proposal of the DOL ESOP Fiduciary Regulation that would be consistent with the July 2012 timeframe we have been discussing.
Employee stock ownership plans, one of EBSA's audit priorities, require special vigilance on the part of auditors, Borzi said. EBSA has seen many cases in which auditors accepted improper ESOP valuation methodologies and assumptions, creating serious and expensive problems for ESOP participants.
EBSA expects to repropose a redrafted fiduciary regulation when it completes work on clarifying aspects of the rule, which could be a couple of months from now, Borzi said.
In updating the regulation that defines a fiduciary, the department seeks to impose a legal liability on individuals who represent themselves as financial advisers when giving individualized investment advice, Borzi said.
Any financial service providers who represent themselves as trusted advisers to a client must put the client's financial interest first, she said.
They also denounced limited scope audits and stated that the ERISA expectation of auditors is to take a skeptical look at valuations.