Preparing for a 401k Audit

A 401K audit can be just as stressful as any other type of audit, if you are not prepared. Not only are the regulators looking to see if plans have been correctly documented, they are also investigating whether or not General Accepted Accounting Procedures (also known as GAAP) were followed correctly as well. The auditing process can go smoothly if you had everything you needed the first time around. If you get organized, you can easily pull all information required for the audit and save yourself valuable time.

Prepare In Advance

The key to getting through an audit is to prepare in advance. Give yourself enough time to gather all of the needed documentation you will need throughout the auditing process. Always keep organized records of your 401K plan as you go along. If you are ready, you will also avoid being rescheduled. You do not want to waste the auditor's time, so plan accordingly and be sure to give yourself a few months to get everything in order.

Required Documents

There are several vital documents you will need to have ready during and throughout the 401K audit process. The first is the Internal Revenue Service determination letter. This letter is awarded after the determination for employee benefit application was accepted. It also means the IRS has decided to audit your retirement plan. You may also want to have previous determination letters as well. You will also need your adoption agreement, plan document and all amendments. Be sure to have your Statement on Auditing Standards 70 readily available as well. There are a few other documents that you should have handy, they are:

    * Plan sponsor financial statements
    * Mutual fund prospectus
    * Yearly statement, for each investment.
    * Contact information for everyone involved
    * Payroll records that prove employee eligibility
    * 5500 forms with schedules
    * Discrimination tests
    * W-2 forms
    * Trial balance statement for the year
    * Copy of all cancelled checks to show proof of contributions for the year
    * Retirement plan agreements from employees

Read the Plan Document

Taking the time to read the plan document can help you compare the way things should be done and asses if you are keeping up well. The plan document should also have up-to-date amendment information to reflect approved changes. It is also a good idea to know what is in your plan document because it is one of the most important pieces of documents to an auditor. Keeping up with legal changes and new amendments in the plan document will also help you stay informed and on top of your company's goals. Reading the plan document may take a few days to a week because of the amount of pages you must read. However, knowing the information before a 401K audit can help move the process along quickly.

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