Selecting participants when auditing participant data and employee con

[Guest Scott E. Hall]

Although this may seem like a simple question, some of at our office have been debating it for awhile:

When an auditor selects participants for purposes of testing participant data and employee contributions, from what population should the sample be drawn --

a. all employees

b. only eligible participants

c. only active participants who are contributing

If the answer is a or b, the risk is that you select too many ineligible employees or participants who are not participating -- and thus may not have sufficient coverage when testing employee contributions. If the answer is c, the risk is that you will not identify potentially eligible participants who are being excluded from the plan.

For you auditors out there, how do you determine your sample?

[Jon Chambers]

Although I'm not an auditor, I'd suggest it should be (a), and your sample should be large enough that even if you get some non-participants or non-eligibles, you still have a representative sample. Of course, if you get no contributors, you can always extend your sample. If you choose (B) or ©, you are not testing an important management control function.

[Guest RBeck]

part of the purpose of selecting employees for testing is to determine whether the criteria for eligibility have been properly applied, so you would have to select employees for testing, not just participants. In other areas, such as testing contributions, loans, and distributions, non-participants are not relevant, so you would select your test group from a pool of participants, not employees. Your sample should be based on the size of the employee population, not just the "magic 10" I've seen in so many audits.