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401k Audit Report – What to look for

Published by Kim Moore on May 15, 2020 6:00:00 AM

If you are in the middle of your first 401(k) Audit, your auditor will be providing a draft set of financials and an opinion letter at the end of the process. You are probably asking yourself, “What do I do with this?” Here are some guidelines to help in your review:

The package that your auditor provides should have a few basic components:
    1. Opinion Letter from the Auditor
    2. Financial Statements including:
      1. Statement of Net Assets Available for Benefits
      2. Statement of Changes in Net Assets Available for Benefits

    3. Footnotes describing major Plan provisions

    4. Supplemental Schedules
      1. Schedule of Assets Held is required
      2. Other schedules as needed

As you review the opinion letter, look for the actual opinion. It will say either unqualified, qualified, disclaimer or adverse. If the opinion is anything other than unqualified, ask the auditor to explain why they used the opinion that is shown. Also, be sure that the opinion letter covers the right period of time and has the right Plan name, etc. Look for any obvious errors. 

The financial statements show the financial position of the Plan at the end of the year and how the plan assets changed from the end of the previous year to the end of the year being audited.  Look for any unusual items and verify the ending balance agrees to Plan reports that you have in the Plan files.

The footnotes should describe the basic operations of the Plan.  Question anything that you don’t believe is correct.  The financial statements and footnotes are your documents so the auditor should not change them for a reason you don’t understand or support. Other items to verify include: 

  • Matching the total assets held on the supplemental schedule to the financial statements.

  • Verifying that the amounts in the financial statements match the Form 5500 figures or review a reconciliation footnote describing the variances.

  • Review any subsequent event footnotes for accuracy.

Your auditor will appreciate a thorough review of the information and won’t mind any questions you ask for clarification. They want to make sure the information is accurate and complete as much as you do.

If you need an audit for your Plan and would like to discuss Summit CPA Group’s audit process in more detail or need an audit for the first time, contact our office at (866) 497-9761. We’re here to help you navigate the world of the 401(k) audit as proficient as possible. We also offer flat-fee pricing so there are no surprises on your bill when the job is complete. For assistance contact our office at (866) 497-9761 to schedule an appointment.

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