The 401k retirement plans are very common throughout the US. For a working professional, it is very important to prepare for life after career. Today, most people start putting money into their 401k plans as soon as they start their jobs. The sooner you begin, the more money you will have by the time you retire.
Even though most 401k plans are very intricately designed, you don’t need to be a financial expert to start preparing for your retirement. The 401 (k) Plan is a tax-qualified contribution plan for people who are looking to start preparing for their retirement. However, there are certain 401k audit requirements that you should know about.
Is an Audit Necessary?
In ideal circumstances, an audit is not necessary for a defined contribution plan. However, according to federal law, an annual audit will need to be carried out if the total number of eligible participants in the plan goes up to 100. If there are 100 eligible participants in the plan, an annual audit will need to be carried out.
It is the responsibility of the plan administrator to hire an independent, registered CPA firm to carry out the audit. The job of the CPA firm is to give an opinion about whether the plan is financially feasible or not. As is the case with any audit, the CPA firm can only give an opinion that all of the data is correct in all material aspects.
All controls are tested, and a number of audit procedures are carried out in order to make sure that the plan is compliant with the regulations set by the government. Moreover, the 401k audit requirements specified within the plan will also be considered while carrying out tests of controls.
What Questions Will Auditors Consider?
There are a number of questions that the auditor will focus on while carrying out the audit. Here are some of them:
• Do all employees get an equal opportunity to participate?
The first question that the audit report will answer is whether all employees get an equal opportunity to participate in the plan or not. Maintaining equality is very important in a 401k plan. All employees should have equal opportunity to participate in the plan.
• Are all accounts fairly stated?
Another key component of an audit plan is to figure out whether the assets of each participant are fairly stated. It is important that all 401k audit requirements are considered when stating the accounts of each participant. Misstatement or misrepresentation is a financial crime. If there are discrepancies in the audit report, they will be reported to the Securities and Exchange Commission for further review.
