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July 31, 2022

401(k) Audit Report Guidelines: What to Look For

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:

  • Opinion Letter from the Auditor
  • Financial Statements including the statement of Net Assets Available for Benefits and the Statement of Changes in Net Assets Available for Benefits
  • Footnotes describing major Plan provisions
  • Supplemental Schedules including the Schedule of Assets Held as required and other schedules as needed

REVIEWING YOUR 401(k) AUDIT REPORT

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

FINANCIAL STATEMENTS IN AN AUDIT REPORT

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.

ITEMS REQUIRING VERIFICATION IN YOUR AUDIT REPORT

Other items to verify include:  matching the total assets held on the supplemental schedule to the financial statements, verifying the amounts in the financial statements match the Form 5500 figures or review a reconciliation footnote describing the variances, and review any subsequent event footnotes for accuracy.

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

As the plan sponsor, when it’s time to audit your 401(k) plan, it’s vital that you hire an experienced auditor to ensure your plan is in compliance. At Anders we specialize in retirement plan 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.

To get started, request a free 401(k) audit consultation below or contact the team at (314)-886-7913 to schedule an appointment.

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