Choosing a 401k plan auditor is an important decision. Companies sometimes choose a CPA firm to conduct the audit of their qualified retirement plan like a 401k who they use for other purposes but many not have the necessary experience just as many plans pick their advisor solely based on prior relationships. The results can be disastrous resulting in fines and disqualifications. An article in CFO magazine reviews the issues and tips on how to finds a qualified plan auditor.
Plans with 100 participants (which really means 100 employees qualified to participate) must conduct audits. The requirements are vastly different than what most CPAs do for a company’s regular taxes looking at, “… not only what’s in the plan, but also what’s not in it, when the assets got there, the composition of those assets, the reasonableness of fees that reduced those assets, plan liabilities, whether proper controls are in place… The DoL may, for example, be concerned with such details as how many days the employer is taking to get withheld payroll funds into the plan.”
So how do you know if a CPA is 401k Plan Auditor? Characteristics include:
- Proper training and experience;
- Awareness of the unique requirements of auditing a retirement plan;
- Proper quality controls on the audit process;
- Understand of the requirements for limited-scope audits.
Other considerations include, “successful experience with other 401(k) plan audits within this firm or its auditors’ prior employers; continuing education on this specialized topic; checklists and reference materials; and in-house training…In a DoL study, released last year, of Form 5500 filings for 2011, ‘major deficiencies’ were found in 39% of 401(k) plan audits. The deficiency rate was 76% among audits by firms that did only one or two such audits.”
The AICPA has a great resource center on the subject as well as a list of qualified ERISA plan auditors.
(See also “Evaluating Defined Contribution Plan Auditors”.)
