As the administrator of your 401(k) plan it’s your duty to select an experienced and trusted third party auditor. After you have found a qualified auditor and discussed the details of what to expect, your auditor is then obligated to give you a document stating the “agreement of services” your auditor will provide.
When the agreement details are suitable to both parties, the auditor will then send you a letter of “engagement”.
WHAT’S THE DIFFERENCE BETWEEN AN “AGREEMENT OF SERVICES” AND AN ENGAGEMENT LETTER?
The letter of engagement is a legally binding contract containing the details of your agreement. Therefore, it’s a good idea to have an attorney review the engagement letter before you sign on the dotted line. What should your binding engagement letter contain?
- The purpose and objectives of the audit.
- Management responsibilities of the plan administrators.
- The names of all parties involved with the contract.
- A statement stating the auditor is an independent contractor.
- Standards that will be followed for the terms of the audit as well as the reporting package and format.
- A statement stating the plan administrator has the right to make changes, adjustments or additions to work in the general scope of the agreement, by written notice.
- The terms of the auditor/plan sponsor relationship dealing with changes in the scope, quality of work necessary, as well as access to and ownership of any audit products.
- The handling of circumstances where an auditor disagrees with the changes, adjustments, or additions to the contracted work performed.
- The type and timing for the audit that is provided by the plan administrator.
- Audit deadlines for the work that is to be performed.
- The cost of the audit. Will it be a flat or hourly rate?
This is just a short list of things you should include in the agreement with your 401k plan auditor. Hiring a CPA firm that specializes in 401(k) auditing will make a difference in how smoothly your audit goes. Utilizing modern technology, it is possible to assist you entirely “off-site”, and with little or no distraction to your daily office routine. At Anders CPAs + Advisors we also offer flat-fee pricing for 401(k) audits so there are no surprises when you receive your bill.
To get started, request a free 401(k) audit consultation below or contact the team at (314)-886-7913 to schedule an appointment.
