How to Prepare for Your 401(k) Audit

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

There are a few simple steps that can be taken during the planning phase of the audit in order to gain efficiencies during the fieldwork phase. You should be in communication with your auditor before the Plan’s year-end date. This is the best time to come to an agreement about the terms, timing and fees associated with the audit.

Once an agreement has been reached, your auditor can begin planning the audit. You can help your auditor to achieve successful planning by doing the following:

  • Discuss any issues encountered by the Plan in the year under audit.
  • Communicate when your team is available to work with the auditor.
  • Ensure the auditor has access to the Plan’s Third Party Administrator website.
  • Request and forward the audit package from the Third Party Administrator to the auditor.
  • Fully read and respond to audit communication before fieldwork.
  • Ask any questions you have as soon as possible.

Upfront communication allows your auditor to assess risk and schedule staff with the appropriate experience and expertise. Confirming the fieldwork dates also helps your auditor to schedule adequately skilled associates. Ensuring that the auditor has access to any necessary online platforms and the audit package as soon as it is available will allow them to import the trust trial balance into the audit software. The trial balance will be used in every phase of the audit, so timely importing is key.

Your auditor will be sending requests for client prepared schedules, forms which include important inquiry items and sample selections. Keep lines of communication open, and reach out to your auditor with any questions, especially when you need clarification regarding items requested. Answering inquiry items and supplying the auditor with schedules and support requested well before the fieldwork dates allows your auditor to work through the more routine audit documentation. It also allows them to reassess whether staffing is appropriate before fieldwork. Finally, it allows everyone involved to be focused on more difficult audit areas during fieldwork, which is the time everyone has committed to being focused on, and available for, the audit.

Following these steps will result in the most efficient use of everyone’s time.

By Kristi Ray