Guidance on 5500 Audit

[Guest Rudy102]

I'm looking for a little advice -- a potential client called today looking for an audit regarding Schedule H of Form 5500 (401(k) plan). Plan has approximately 145 participants w/approx $1.35 million in assets & 12 fund investment options. This is the first time an audit has been required.

Our firm has done numerous small business and non-profit audits, but never one of these. I am wondering whether this potential engagement is worth pursuing -- how much background (PPC guides, etc.) do I need? - any specialized govt/DOL requirements I need to meet? - how much difference between this audit and a typical audit of financial stetements?

Any help would be greatly appreciated -- Our firm might be interested in pursuing and developing these audits as another line of practice, but not if the cost of the prerequisites might outweigh the potential fees.

[rcline46]

Start with the AICPA 'Audits of Employee Benefit Plans' and the DoL regulations dealing with audits since they were modified just last year and may not be in the AICPA guide yet.

[E as in ERISA]

Also look at the DOL's report on the problems with plan audits at

http://www.dol.gov/pwba/programs/oca/ocaudit.htm .

[Guest b2kates]

Let me add my 2 cents. You will also need to have someone on your staff or access to someone who is familiar with ERISA plans. In todays environment, these are audits that carry risk with them.

Look at whether your fee structure will support the time necessary to do a proper audit--assuming you have never done one in the past.

Best of luck

[RCK]

As a plan sponsor, who was on the other side in a former life, I would submit some observations:

1. If you're doing this as a service for existing clients, that makes some sense. If you're going to do it in the hope of attracting additional clients, the results might be disappointing.

2. b2kates is right on--it is a specialized skill set.

3. Don't underestimate the workflow issues. It seems to me that an inordinate number of qualified plans, and particularly 401k plans, are calendar year. That means that they all have the same filing deadlines, and that the window of time when they want the work done is going to be pretty narrow.

RCK

[bzorc]

As a former recordkeeper now with a CPA firm, I have now taken on certified audits of retirement plans. These tend to be overlooked, especially when you have, as I did this year, a plan with greater than 100 participants ELIGIBLE but only 20 to 30 participating. The client came to us on October 11 looking for a completed audit by October 15!

This specialty audit, as RCK mentions, is not a place where you go and try to solicit business. All of our certified plan audits are an additional service provided to a client that would utilize our form for corporate returns, etc...