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Audit Sampling for Your 401(k) Plan

Published by Kim Moore on Mar 16, 2020 6:00:00 AM

Audit sampling is a list of transactions that need supporting data. When a 401(k) plans need an audit, your auditor will supply you with the sampling list.

Your auditor will review the total number of transactions in the selected type of transactions available, which are referred to as “the population”. Based upon the analysis of the “population”, the auditor will then select a few items for further review “called “testing”. Any items that are selected for testing are called “sample items”. Testing samples will help the auditor verify the accuracy and completeness of all the items in the total population. There are various ways in which your auditor may select the sample. Two methods are:talia_holding_books_by_chalkboard_20942-1

  • Random sampling (every item has an equal chance of selection).

  • Attribute sampling (the population is segregated based upon characteristics of the items and sampling occurs from these different groupings of transactions).

In both cases, the auditor is using a statistically-based process to verify the precision of the information they are reviewing.  If errors are found in the testing of the sample data, the auditor may be required to add items to their testing.  Your auditor may require “replacement” test items or an additional sample of several test items. 

It’s imperative in all cases that provide your auditor with the requested information or explain why it is not available or not applicable for a test item. The failure to provide the required information may require your auditor to issue a scope limitation in their audit opinion. These audits do not have “clean” opinions and can cause regulators such as the Department of Labor or IRS to issue penalties against you, the Plan Sponsor or the 401(k) Plan itself.  

Retirement plans can be very complex. As an innovative firm Summit CPA specializes in 401(k) audits. We have the ability to offer assistance entirely off-site with little or no distraction to your daily office routine.  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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