Getting a Jump-Start on your 401(k) Audit

This is the time of year that you start looking at your 401(k) audit.

Here are a few tips for preparing for your 401(k) Audit:

1. Gather all plan documents including new amendments that were made during the
   current year. Your auditor will ask for them.
2. If you intend to have a limited-scope audit of the plan, obtain a valid certification
   for the plan.
3. Accumulate copies of any new or updated service agreements and fee schedules
   with 3rd-party service providers.
4. Check to see if your fidelity bond is sufficient. The amount of fidelity bond
   coverage required varies depending on the amount and type of assets in the plan.
   Most plans’ net assets are increasing each year, but it is very common to overlook
   increasing the fidelity bond.
5. Obtain and review SOC 1 reports for service providers. Make note of any control
   deficiencies in the report. Additionally, compare the user entity controls listed
   in the SOC 1 report to your internal procedures and make note of any deficiencies.
6. Review and update your documentation of the processes and controls over plan
   operations to assist the auditors in verifying their understanding of how the plan
   works. Provide a copy to your auditor.
7. Obtain a copy of the plan census from your plan administrator. Reconcile the
   total salary on the census to your payroll records. If it doesn’t tie out, investigate
   the discrepancy.
8. Obtain a copy of the trust report for the plan along with the participant detail
   and perform the following procedures:
   1. Reconcile the totals from the trust report to the totals from the participant detail
   2. Agree employee contributions per your internal payroll records to the trust report
   3. Agree employer contributions per your internal records to the trust report

Have most of your questions worked out before the auditor arrives. This makes the
time the auditor spends at your office less stressful and fewer interruptions will
be the result.

Charlie Wendlandt

I joined Hawkins Ash CPAs in 2011. As a manager, my main responsibilities include planning, test of transactions and preparation of financial statements for ERISA audits during outside of tax season. During tax season, I work with compilation and reviews and the preparation of corporate tax returns.