1. Defined Contribution Plans Audit Best Practices

2. TRAINING OBJECTIVES Understand audit requirements
Understand what auditors do
Provide recommendations for documentation best practices
** The remarks made during this presentation relate to audits of qualified plans under Title I of ERISA

3. AUDITS Independent audit – limited or full
Audit by the Internal Revenue Service
Audit by the Department of Labor
Audit required by statute

4. WHY AUDITS ARE IMPORTANT
Assists management in meeting fiduciary responsibility
Produces more reliable information for managing the plan and preparing participant disclosures
DOL relies on CPA audits
Required by law
Contributes to sound pension and retirement security system

5. THREE PHASES OF AN INDEPENDENT AUDIT
Planning
Fieldwork
Completion

6. PLANNING Gain an understanding of the plan’s operations
Assessment of control environment
Analytical and substantive procedures
Fraud assessment
Changes in plan environment
Assess regulatory correspondence
Provide audit requests

7. FIELD WORK Census/demographic data Eligibility
Deferrals, employer contributions, and rollovers
Distributions and loans
Timeliness of contributions
Analytical review of investment income
Investment transactions (if full scope)
Transfers, mergers, terminations

8. FIELD WORK
Certain compliance areas (bonding, non-discrimination testing, prohibited transactions)
Related parties and parties-in-interest
Inquiries of management and legal counsel
Review of Form 5500 for material inconsistencies

9. COMPLETION Subsequent events procedures
Reviews by various levels in firm
Client review and approval of financial statements
Management representation letters and required correspondence
Financial statements to accompany Form 5500

10. WHAT DO AUDITORS NEED? Personnel records
W-2 and earnings statements for specific periods
Enrollment forms and investment elections
Rollover forms and copies of checks
Wire transfer documentation
Loan documentation

11. WHAT DO AUDITORS NEED?
Distribution forms and copies of checks (including spousal consent if necessary)
Non-discrimination testing results
Documentation of compliance

12. ELECTRONIC ENVIRONMENT
What if the information requested is not available in hard copy?
Service provider or plan administrator may have confirmation of transactions
Alternative procedures
Confirmation with participants is best source!

13. COMMON ISSUES FOUND IN PLAN AUDITS
Information not available (client and recordkeeper)
Operational Deficiencies
Prohibited Transactions
Timeliness

14. COST AND COMPLIANCE Cost of a quality audit is worth it
Be serious about compliance and fiduciary responsibilities
The cost of non-compliance is greater than complying

15. CONTACT INFORMATION
Christopher Nardone Kristin Hustus CohnReznick LLP