Audit Requirements?

[chris]

Plan has reached point where annual audit is required. Client is looking for CPA to handle. CPA is saying he has to go back to year 1 to follow balances up through present. Plan was set up in 1979. He says initial fee for doing so would 25K to 30K. Thereafter, CPA says it would be 7500 per year. Question is do audit requirements really require going to year 1 of the Plan? Thanks.

[could be me maybe not]

I don't know, but my comment is WOW.

[Belgarath]

I'd certainly check with some other CPA's - only they can answer this question.

Several years ago I queried several CPA's as to their approximate fees to prepare an audit on a small plan (to be able to explain to employers the cost if they didn't satisfy the small plan audit waiver requirements). The fees were fairly steep, as you can well imagine, but nothing like the quote you received, nor was there ever any mention of having to go back to day one. I'd be interested to see if other CPA's give you the same response you first received - 'cause that sure is a pile of money and difficulty - imagine trying to reconstruct records and statements going that far back. Many of our clients can't find their own payroll records for the current year without a 6-man scouting party!

[david rigby]

Keep looking. My take on this fee quote is that this CPA does not really want this business.

[JDuns]

My take on this fee quote is that this CPA does not really want this business.

Or that they have some reason to believe that the plan may have significant problems and will not be comfortable issuing an opinion without a significant amount of background work.

It is not unusual to have higher fees for the first year with a new auditor (since they have to review the plan and trust documents, many of the plan processes, and lots of other stuff). For subsequent years, they only look at changes plus the audited stuff.

That being said, going back to 1979 seems odd and the fee differential seems quite high.

[Guest stryan]

I believe it is common for auditors to go back "one year" in order to substantiate the validity of the beginning balances for the year being audited. I have never heard of anyone going back to "year one". I would certainly be looking for additional quotes.

[JanetM]

No where in the AICPA audit guide does it say the beginning of the the plan. It does require the auditor to review prior year data as the statements are comparative and show current and prior year data.

The high quote could be intending to scare you off. There are all kinds of new documentation requirements (CYA type of stuff) due to SOX so my first guess is the CPA firm doesn't want the work/headache/liability.

JDuns .... 99% of the time the opinion is not an opinion but rather a disclaimer, and nothing anyone can rely on in a court of law.

[jquazza]

The other thing to consider is what ytpe of assets are held and who has the custody. If the assets are held by a bank who can certify the statements, the auditor usually only has to do a limited scope audit and that reduces the fees tremendously.