Federal law requires that 401k plans with 100 or more participants be vetted as part of their obligation to submit form 5500 annual declarations. When your plans need review, this is one of the most important commitments. An important role of the plan administrator is to hire a qualified independent auditor.
When selecting an auditor, the plan administrator should consider the following:
Make sure the auditor is licensed
Federal law requires that the auditor assigned to review the plan be licensed or certified as an accountant by a state regulatory authority. If you are hiring an auditor, you may want to discuss the auditor's work for other 401k customers. For more details on form 5500 preparation search online.
Ensure independent auditors
Auditors of the 401k plans must not have a financial interest in the plan or sponsor the plan that could affect their ability to provide an objective and impartial assessment of the plan's financial condition.
Ensure auditors have experience with employee benefit plans
One of the most common reasons for poor accounting is that auditors do not conduct audits in areas unique to employee benefit plan audits. The more trained and experienced auditors are, the more familiar they will be with the practice and operation of the plan and the specific audit rules and regulations that apply to the plan.
In some cases, less experienced auditors may be hired to perform routine audit procedures to reduce audit costs. In this case, you should ensure that auditors with experience in employee benefits review their work and perform more complex review procedures.