When your Company hits over 120 participants within your plan, it’s time to start looking for an auditor that is right for you! As the plan administrator, one of the things you must do is evaluate your options and ensure that you hire a qualified firm to assist in your audit. There are some key qualities to evaluate when making this selection. Hiring a qualified auditor will provide a quality audit which will assist in fulfilling your responsibility to file accurate annual statements, assist with avoiding any penalties associated with filing untimely, as well assist with keeping you informed on upcoming topics related to employment benefit plans to keep your plan in compliance.
First, the auditor is required to be licensed or certified by the state regulatory authority as a certified public accountant. When an auditor steps in to complete the audit, he or she must also be independent. What does this mean? The auditor should not have any financial interests in the plan that might impact his or her ability to remain unbiased when issuing an opinion on the financial condition of the plan. Additionally, it is important that the audit firm has experience in auditing employee benefit plans. This is a common issue in employee benefit plan audits that has caused many audits to have deficiencies.
During the preparation of your first audit, there are some additional things to keep in mind. Be aware that Department of Labor’s rules and regulations permits limited scope audit on employee benefit plans when the plan’s assets are held by banks or insurance companies and they have written certifications for investment activity. Be sure to consult with an attorney, plan adviser, or auditor to ensure this is the best route for your plan. Lastly, in the final stages of selecting an auditor, the auditor will provide an engagement letter describing the terms of the audit. This normally will include responsibilities that the auditor will have as well as your responsibilities throughout the audit. This normally entails the timing, scope, and fees associated with the audit. Read this carefully and be sure to ask any questions that arise to make sure you understand and agree to the terms of the audit.
Following these simple steps should assist in finding the right auditor for you! If you have additional questions regarding the search for a new auditor please don’t hesitate to contact us for more information.
By Brie C. Keckler, CPA