Your auditor’s engagement letter details the expectations of the roles of both auditor and plan sponsor. Understand that if the scope of services changes, the engagement letter may need to be updated during the course of the audit. Because an update typically means more work for the accountant, that can translate to paying higher fees. So, it’s better to fully vet the issues before beginning by asking these questions:
- Can we perform a limited-scope audit, or do we need a full-scope audit to satisfy the DOL?
- Do we have all of the financial records up to date and easy to locate?
- Do we need to file a Form 11-K with the Securities and Exchange Commission (SEC)?
- Do we have a list of internal controls by which the auditor can assess the risks of material misstatement of the financial statements?
- What is the auditor’s responsibility regarding supplemental schedules required by the DOL?
- Is tax-exempt status an issue? If yes, will the auditor give an opinion regarding the plan’s qualification in that regard?
- Will the auditor be responsible for information for the Form 5500 and/or Annual Report?
- How will the auditor communicate ERISA compliance issues found during the audit – verbally or in writing?
- What is the auditor’s responsibility regarding electronic filings?
- Have we agreed upon estimated delivery time, fees and billing arrangements?
Asking these questions will set expectations and fulfill your fiduciary responsibility to your plan participants. We recommend keeping a written record of all correspondence and requesting verbal communications to be confirmed in writing.