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What Are The Basic Steps to Complete a 401(k) Audit?

Published by Kim Moore on May 14, 2021 6:00:00 AM

What Documents Will You Need?

If you just found out that you need a 401(k) audit for your Plan, you are probably wondering what documentation will my auditor need and where do I start? We know that especially, the first plan audit can be a daunting task. Here at Summit, we try and make the process as easy as possible.

      • Your auditor will begin by conducting some initial planning materials such as an:
      • Engagement letter.
      • Initial discussions with you on audit timing.
      • You may be asked to complete some questionnaires, etc.

After that work is completed, the auditors will want to dig right into working on your audit. Some initial information can be gathered from your service providers. Information such as:

      • The set of Plan Documents that govern the Plan.
      • Financial activity reporting (sometimes called the Audit Package).
      • Discrimination Testing for the Plan.
      • Plan Census is a good place to start.Basic 401k audit steps

It would be a good idea to check with your 401(k) service provider on those items ahead of the audit so you are well prepared to get started. At Summit, we request access to the Plan website so we can pull reports directly or request the information needed from the service provider. That makes the process start smoothly.

Next, the auditor will need to gain an understanding of things such as:

      • The Plan provisions.
      • Conduct risk assessment and control assessments.
      • Verify that understanding and design the test of controls that will be used going forward.

This will involve reviewing the controls both at your company and within your service providers. It may take some effort on your part for the first audit if you do not have documented procedures. Be prepared to ask a lot of clarifying questions from your auditors if any of their requests are confusing.


Once the testing protocols are established, the auditor will move into the testing phase of the audit. This will involve testing the types of transactions that occurred with your plan (contributions into the plan, distributions out of the plan, participant loans, etc.). The auditors will select a sample of each category for testing and request documentation from you and your service providers. Again, don’t hesitate to ask what is needed and why it is needed. The auditor should be able to explain all their requests and provide alternative testing procedures if needed.

Final phase

Once the testing is completed, the auditor will move onto the final phase of the audit: preparing the audit opinion. They may draft the financial statements and footnote disclosures also if needed. They will need to compare the information to the Form 5500 for the Plan.

The final audit report

Once a draft is available, they will share it with you and answer any questions that you may have. The final audit report with the opinion letter, financial statements, footnotes, and supplemental schedules will then be provided. You will take this package and file it with the final Form 5500 on the Department of Labor E-FAST website. This will close out the audit for the year.


Our recommendations for a smooth and relatively painless audit are to follow your auditor’s guidelines, ask a lot of questions, meet the established due dates to provide information, and start your first audit as early in the year as you can. Work with your auditors and the process can be completed on time which helps make the process less stressful for everyone.

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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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