Can't get all info needed for audit

[Jim Chad]

I just took over administration of a Plan that needs an audit for last year (PYE June 30, 2007) for the first time. We may not be able to get all the information the CPA's need for the audit. One thing that seems no on has a copy is the 1099s for 2006. Without them the auditor says they cannot confirm that money was paid out of the Plan to thes 6 participants.

1, Does anyone have any suggestions about how we can show that money out of pooled investments were paid to Participants, other than cancelled checks?

2. What are the options if an audit cannot be completed?

[JanetM]

1. Is there records to show distribution requests from participants? Alternative test could be sending confirmations to all that were paid.

Is there enough detail in from trustee to show distribution to individual?

Can the 1099s be recreated by issuer?

2. Not good ones. Grovel beg and plead to avoid penalties. Audit will have to be done, even if they must issue adverse opinion. Is this limited scope with no actual opinion or full scope with opinion?

[masteff]

Does anyone more current than I on plan audit standards know if 1099's are truly a required document? Frankly, having done some fraud work, cancelled checks are much higher on the list of credible evidence of the transaction (especially when coupled w/ the distribution request forms and trust statements showing the disbursement). My first thought was what Janet suggested about sending confirmation letters to those six participants.

Or perhaps what they're truly testing w/ the 1099's is the subsequent tax reporting and not the distributions themselves.

My thought is if this is only piece that's missing, then escalate w/in the audit team to see how hard and fast they are about needing the 1099's. Often a staff level auditor is working for a preprinted audit plan which says "get copies of 1099's". A higher level auditor would be needed to make the judgement call that other documentation is sufficient for a particular audit step. Definitely ask to go up the chain of command before accepting an adverse or qualified opinion.

[JanetM]

Cancelled checks at the gold standard of evidence becuase they show the issuance of the payment and that the participant cashed the check (recieved the funds).

As far as 1099 testing, it is more for compliance with statute. But since it is quick and easy way to get list of all distributions to test many think that the 1099 is the only source for distributions.

Don't forget 1042S if you pay folks out of the US. We like to mess with baby auditors with these.

[Jim Chad]

Thanks for the ideas. You are all a big help!