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Plan Audit Red Flags – Automation Plays Important Role

Plan Audit Red Flags – Automation Plays Important Role. Immediately following a recent Fiduciary Education Program held at the University of Georgia, Bruce McFadden, a Certified Public Account, at the accounting firm Carr, Riggs and Ingram was interviewed.  Mr. McFadden brought over 30 years of public accounting experience to a recent The Plan Sponsor University (TPSU) program in Atlanta. He is well-versed in employee benefit plan audits and serves on the Quality Control Committee at Carr, Riggs and Ingram.

One of Bruce’s responsibilities in the firm includes overseeing qualified plan audits.

Getting the Plan Audit Right

It is rare that any company would look forward to such an audit; however, when speaking of the qualified plan, the outside audit should be embraced and viewed as a management tool.

The Employee Retirement Income Security Act of 1974 (ERISA) requires an annual audit, by an independent qualified public accountant.  The requirement applies to all plans with at least 100 or more eligible participants at the onset of the plan year.

Knowing the Red Flags of a Qualified Plan Audit

Bruce referenced some “audit red flags” of which 401k plan sponsors should be aware when overseeing retirement plans.

High on the list are Employee Complaints made directly to the Department of Labor (DOL).  Nothing will result in a more timely introduction to the regulator than having two or more employees of a firm file a complaint directly with the DOL.

Beyond a complaint, as described above, automation plays a large role in identifying which plans will be identified for further scrutiny by the DOL.  The marriage of 5500 Report filings and optical scanning contributes to an increasing number of DOL audits.  Missing 5500 filings, missing audit reports, Fidelity Bond deficiencies or Prohibited Transactions are easily recognized through automation and each qualifies as a red flag today.

As mentioned during the TPSU Program, ”take advantage of your outside audit. It is much better to experience the outside audit and have a reasonable certainty and comfort-level around your plan’s processes and procedures instead of wondering.”

Steff Chalk

Steff Chalk

Executive Director at 401kTV | TRAU | TPSU
Steff C. Chalk is Executive Director of The Retirement Advisor University, a collaboration with UCLA Anderson School of Management Executive Education.Steff also serves as the Executive Director of 401(k)TV and The Plan Sponsor University. Steff is current faculty of The Retirement Adviser University.
Steff Chalk
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