Employee Benefit Plans: The 411

Valuable Information on 401ks, Pensions, ESOPs, Form 5500 Preparation + More

Guide to a 401(k) Audit

As a plan sponsor you may be required to engage a CPA firm to perform an audit of your 401(k) plan. As a general rule, the audited financial statements are required to be filed with your Form 5500 if you have 120 or more eligible employees. This is the general rule and your specific situation would need to be evaluated to make a final determination. The audit process can seem daunting if you have never been through the process. The following is a guide to a 401(k) audit (assuming your plan qualifies for a limited scope audit):

  1. You will need to request the audit package from your third party record keeper, which will include the trust and participant accounting. This audit package will need to be forwarded to your auditor or the auditor will need to be given access to an on-line account to access the information.
  2. You will need to provide all of the plan documents such as the IRS determination letter, plan document and all amendments to the original document.
  3. Once this information is provided, your auditor will schedule a fieldwork date with you to come out to your location to meet with your personnel who are responsible for your plan. The auditor will need to gain a better understanding of how the plan accounting works, the internal controls over the plan, and any fraud risk.
  4. Once this information is obtained, your auditor will pick a sample of employees, distributions and loans, and request that you provide employee files and supporting documents for the distributions and loans.
  5. When fieldwork is done and financial statements are completed, you will be provided with a draft of the financial statements and a draft of a report of any control deficiencies found during the audit. You will also receive a management representation letter and any adjustments made to the plan accounting records. This letter will need to be signed and returned to the auditor.
  6. Once the management representation letter is returned and you have approved the financial statement draft, the auditor will provide you with a final financial statement.
  7. The financial statements will need to be filed with your Form 5500.


By Christine Brueser, CPA