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Understand when can you invoke the limited scope audit exemption

Understand when can you invoke the limited scope audit exemption

The Department of Labor allows an exclusion from the annual audit of assets of the plan which are held by a bank or similar institution or insurance company that is regulated and subject to periodic examination by a state or federal agency. This applies if the institution holding the assets certifies the required information and the plan administrator exercises this option. The exercising of this option allows for a limited scope audit, which is substantially less in scope and costs significantly less than a full scope audit.

Your auditor should show you the courtesy of determining whether the audit is to be full or limited scope before quoting you a price. An auditor can still perform a full scope audit when a certification exists, but the more client friendly approach is to indicate that a limited scope audit can be performed.

However, limited scope audits cannot be used in all situations in which a certification exists. For example, if the certification does not cover certain plan assets, then those assets are subject to full audit procedures. Also, plans that are required to file a Form 11-k should have a full scope audit. The reason for this is that the Securities and Exchange Commission will not accept a limited scope audit report in connection with a Form 11-K filing.