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401(k) Plan: Full Scope or Limited Scope 401(k) Audit?

Published by Kim Moore on Feb 13, 2020 6:00:00 AM

Are you are a 401(k) Plan sponsor? Do you know if you need a full scope audit or a limited scope audit? As the plan sponsor it’s your duty to find out which audit is best for your Plan. ERISA (The Employee Retirement Income Security Act of 1974) rules allow limited scope audits when a Plan meets certain conditions, such as:

  • The entity providing the certification over the Plan assets must be a qualified institution.  Banks, insurance companies and trust companies, generally are qualified as they are regulated and subject to periodic examination by a state or federal agency.character_thinking_17670_-_Copy

    Note: Securities brokerage firms are not regulated and examined periodically so they do not meet the requirements and cannot provide a valid certification.

  • The certification must include the words “complete and accurate” and refer to the information that the entity is providing the certification over. In addition, it must be signed by an authorized individual of the certifying institution.

  • If an asset certification can be provided, the auditor is not required to test information such as the accuracy and completeness of the ending investment balances held by the Plan. From the Plan Sponsor’s perspective, if the audit can be conducted as a limited-scope audit, the audit fee should be lower than a full-scope audit.  It is worth researching if this is an option for your Plan audit.

If you 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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