Mark Ellis, director at Sanctum Software, said about 26 per cent of firms could be getting auto enrolment wrong to the point where consumer detriment is caused.
A survey his firm carried out among 17 advisory firms at the early stages of auto-enrolment, about two-and-a-half years ago, found 59 per cent thought employers were getting auto-enrolment wrong from a systems point of view.
A further 26 per cent of the advisers thought consumer detriment would be caused by the failings.
He said: “This was two years ago but I have seen nothing to suggest the amount of errors out there are anything less than 26 per cent now.”
Sanctum Software works with large and mid-size businesses.
The software is typically used by the firm's adviser to assess the potential liability from any mistake made.
Mr Ellis said the firms where it found the most errors were those employing between 300 and 2,000 people, which are "large enough that a problem can have a significant financial impact but they are unlikely to have in-house auto-enrolment expertise."
He said problems did not always occur at staging, they could creep up during staff changes later down the line, but any mistake made could quickly grow in scale.
One firm Mr Ellis had looked at had amassed liabilities of £500,000 involving 500 members of staff over the course of just a few years.
He said: "Although there are complexities in the detail of complying with auto-enrolment legislation, we and our partners have seen numerous examples of basic errors, including employers using the wrong contribution levels and errors in the application of tax relief.
"Auto enrolment hasn't hit the radar until recently because the financial impact hasn't been large.
"[But] we are seeing cases where basic errors in how auto-enrolment has been set up can, if undetected, result in significant liabilities for a business.
"The problem is people don't like to own up to this [unless they have to].
"Make this part of a standard company audit and then we will get some real data."
He also said auto-enrolment compliance had started to become a standard part of the due-diligence process in corporate transactions.
This is driven by concerns that undetected auto-enrolment compliance failures could result in significant liabilities, he said.
Besides, there is regulatory and legal risk as The Pensions Regulator has started to crack down on bad practice and employees could group together to form a class action, he said.
But Raj Mody, partner at PWC, said responsibility for checking compliance should not be pushed onto independent audit firms.
He said: "While the issue is obviously important, it is not the job of an external company audit to check day-to-day good management of an organisation.
"Plus given there are many detailed and technical aspects to auto-enrolment compliance, I doubt that all of that would routinely form part of a company audit.
"It is, of course, possible to carry out such a review but I would see that as being part of a more bespoke exercise and in broader context of an organisation's overall pensions and benefits situation, including pay compliance, for example."
Henry Tapper, founder of the Pension Playpen, said there was already a 'natural audit' process in place.
He said: "The compliance aspects of auto-enrolment are now generally dealt with by payroll.
"Most small and medium-sized employers have payroll software which should ensure that the right amounts are paid at the right time to the right people.
"For most small businesses, payroll is run by the company accountant, so there is a natural audit function in place."
Paul Stocks, financial services director at intermediary Dobson and Hodge in Doncaster, said he would be wary of the costs associated with such a compulsory audit measure, especially for larger firms.
He said: "Auto-enrolment needs to be embedded into payroll but the nature of the surrounding legislation is that there are so many potential pitfalls there is a danger it takes over payroll.
"I would often say to employers that I am all for auto-enrolment but not how it is implemented. When re-certification and re-enrolment is needed, I suspect many firms will be oblivious to their obligations.
"However, regulation needs to protect against those who would flout the requirements."
So far more than nine million people have been auto enrolled by 1 million employers, with 545,000 people already approaching re-enrolment through 37,000 employers.
The Pensions Regulator has served 79,879 compliance notices to employers for failing in their auto-enrolment duties by 31 December, resulting in 32,211 fixed penalty notices and 6,770 escalating penalty notices (EPN).
The latest firms taken to court over auto-enrolment were bus company Stott Tours and Crest Healthcare.
carmen.reichman@ft.com
