A professional audit of your retirement plan does more than fulfill federal reporting requirements. It can also help protect the plan’s financial integrity, improve plan operations, and avoid costly penalties. And, perhaps of greatest importance, an audit can help ensure the plan will have the funds to pay your employees’ retirement benefits, and assist the plan sponsor in carrying out its legal responsibilities.

1. May 2013
The Value of an Annual Retirement Plan Audit
By Kevin Petrosino, CPA
A professional audit of your retirement plan does more than fulfill federal reporting requirements. It can also
help protect the plan’s financial integrity, improve plan operations, and avoid costly penalties. And, perhaps
of greatest importance, an audit can help ensure the plan will have the funds to pay your employees’
retirement benefits, and assist the plan sponsor in carrying out its legal responsibilities.
Does Your Plan Need to be Audited?
Under federal pension law (ERISA), retirement plans are generally required to have an annual financial
statement audit as part of the Form 5500 return/reporting process. In general, plans with 100 or more plan
participants — so-called “large plans” — are subject to the annual audit requirement. Some smaller plans
also may be required to obtain an audit if they don’t satisfy certain waiver conditions related to plan
investments, bonding, and disclosure requirements.
Your Plan’s Financial Statements
Essentially, the purpose of your retirement plan’s financial statements is to provide information that is
useful in assessing the plan’s current and future ability to pay plan benefits. An audit of the plan’s financial
statements by a certified public accounting firm provides the plan sponsor, plan participants, the U.S.
Department of Labor (DOL), and other interested parties with a third-party opinion as to whether the
financial statements are fairly presented in accordance with U.S. generally accepted accounting principles
(GAAP) and in compliance with the Department of Labor’s Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974.
In addition to helping employers/plan sponsors fulfill their legal responsibility to file a complete and
accurate Form 5500, an audit can help employers streamline and improve their plan’s operations. Some of
the items your plan auditor looks at include:
• Your payroll process to determine that employee compensation and plan contributions are
calculated correctly
• How contributions are credited, and whether they are deposited in a timely manner
• Whether benefit payments were made according to the plan’s terms
• The valuation of plan investments
Your auditor may also be able to identify compliance and operational problems — problems that could lead
to costly penalties if uncovered in a DOL or IRS audit.

2. Examining Internal Controls
The IRS has indicated its agents will focus on internal controls when they are auditing a plan. A financial
statement audit can help prepare your plan for this added scrutiny if the IRS should select your plan for
audit. As part of a financial statement audit, the auditor looks at the plan’s internal controls over financial
reporting. When a plan has effective internal controls in place, errors are prevented from occurring or are
quickly identified before there are large financial consequences, less detailed audit testing may be
necessary.
By examining your plan’s internal controls, your auditor can tell you whether the plan has effective checks
and balances in place to reduce the chance of error or fraud and suggest procedural improvements, if
needed. Written documentation of your plan’s internal controls provides evidence that they exist and are
being used, which is one of the areas IRS auditors look at in their focus on procedures.
If you outsource certain plan-related functions, such as participant and/or investment recordkeeping, your
plan’s independent auditor will include an examination of the provider’s internal controls in the audit. Many
outsourced plan administrators, trustees, and custodians can provide a service organization control (SOC)
1 Report that the auditor can rely on to some extent.
Use an Auditor with Experience in Auditing Employee Benefit Plans
One of the most common reasons for deficient accountants’ reports is the failure of the auditor to perform
tests in areas unique to employee benefit plan audits. The more training and experience that an auditor
has with employee benefit plan audits, the more familiar the auditor will be with benefit plan practices and
operations, as well as the special auditing standards and rules that apply to such plans.
In some instances, a less experienced auditor may be assigned to perform routine audit procedures in
order to reduce audit costs. When this happens, you should confirm that an experienced employee benefit
plan auditor will review his/her work, as well as perform the more complicated audit procedures.
Your Auditing Needs
You shouldn’t overlook the value of securing a quality plan audit. If you have any questions or would like to
discuss your plan’s auditing needs, contact your local MHM office. As a member of the American Institute
of Certified Public Accountants (AICPA) Employee Benefit Plan Audit Quality Center, we are well prepared
to meet the challenges of performing quality audits in this unique and complex area.
Copyright © 2013. Mayer Hoffman McCann P.C. All rights reserved. Contents of this publication may not be reproduced
without the express written consent of MHM. Mayer Hoffman McCann P.C. is an independent CPA firm providing audit,
review and attest services, and works closely with CBIZ, a business consulting, tax and financial services provider.