small plan audit

[Gary]

do folks (us practioners) generally contact the plan sponsor of a small plan once they find out that they are not exempt from the schedule I plan audit requirement and advise them to contact a CPA firm to get it handled?

what if they don't have ample time to get the audit prior to filing of 5500 due date?

curious how this issue is handled logistically.

Do some of you contact clients just after the plan year ends to make this determination and inform them at that time? For example in January 2012 we can find out if a plan is bonded sufficiently at end of 2011 and then advise at that time.

thanks

[david rigby]

Assuming you are referring to the 120-participant trigger for audit, most practitioners will keep the sponsor advised every year how close the participant count is to 120, and what action (if anything) the sponsor can do to keep it down. If you chose not to do this, you will quickly see how angry your client can get.

[Effen]

I assume you are refering to non-qualifying investments in the trust that would trigger the audit requirements?

Obviously you can only consult on things you are aware of, so what did you know and when did you know it. Seems to me as soon as you know an audit will be required, you should tell your client. What excuse would you have to not tell them?

[Gary]

yes, i agree effen.

so as i see it, once i inform client he needs to go out and find firm to prepare audit?

what if there isn't enough time before the due date of 5500 for client to obtain report from CPA firm?

thanks

[frizzyguy]

yes, i agree effen.

so as i see it, once i inform client he needs to go out and find firm to prepare audit?

what if there isn't enough time before the due date of 5500 for client to obtain report from CPA firm?

thanks

I would make that a qualifying criteria in finding an auditor. There are definitely auditors out there that would turn an audit around quickly in the first year if it meant recurring work. Also, auditors expect first year audits to come with headaches. Including quick turnarounds.

[rcline46]

An interesting sidelight - the trustee (and in this case, probably the sponsor) should be aware that they acquired a non-qualifying asset. If they don't know, they should have gotten advice before the acquisition.

This is another case of 'Don't make the client's problems your problems'. If they are so slow in providing information that you cannot provide timely advice, it is not your problem!

[chc93]

Can't they also try to get a fidelity bond to cover the non-qualifying asset. As I understand it, the amount of the non-qualifying asset is determined as of the last day of the prior plan year. So if a non-qualifying asset is acquired during the year, a fidelity bond is not required until the following year. And, while the fidelity bond has to be in effect on the first day of the following year, I think the DOL has relaxed that to "as soon as the non-qualifying asset value can be determined".