6 Steps to a Better Audit

With spring, comes the annual Form 5500. To reduce audit costs and minimize interruptions, do these 6 things and make the process as painless as possible:

1. Determine changes to the plan since the last audit. For example, have you revised the plan document in any way? Have you implemented any new procedures or policies? Providing a heads-up to the auditors means that they can address the issues without having to search and discover the changes.
2. Ask the auditors for an advance checklist of items needed, and gather the materials before they arrive. Be sure to prepare a current financial statement.
3. Review transactions for the prior year to anticipate questions from the auditor(s) about eligibility, contributions, loans to participants, and benefit payments.
4. Look for possible red flags that you can address prior to the audit. Examples include prohibited transactions and nondiscrimination testing.
5. Request all communication to go through one point of contact to minimize confusion and possible double work.
6. Plan to tie up the loose ends and outstanding items while the auditors are onsite or shortly after they leave. Timely completion typically results in a lower bill.

For more tips on selecting the best auditor for your plan, see our list of helpful posts that talk about things you need to know. Remember that when you schedule your audit several months in advance, you have more flexibility in planning your dates. And, something about scheduling in advance moves the needed actions higher on your list of things to do. Please contact me, Dalton Cox, if I can answer any of your questions about 401(k) audits.

Tags: 401(k) plan checklist, compliance, Fiduciary Responsibility, Form 5500, Plan audits, Retirement Plans