For many plan sponsors, audit readiness often gets boiled down to having schedules prepared and being able to respond quickly to audit requests. While that is part of the process, it is not what auditors or regulators ultimately focus on.
True audit readiness goes well beyond prepared numbers. It reflects how well the plan is governed, monitored, and documented throughout the year.
Beyond Schedules: Governance Comes First
One of the most common misconceptions is assuming that reliance on third-party service providers shifts responsibility away from the plan sponsor. Under ERISA, fiduciary responsibility remains with the sponsor, even when administration or recordkeeping is outsourced.
An audit ready plan can clearly demonstrate:
- Who is responsible for key plan functions
- How service providers are selected and monitored
- How decisions are reviewed, approved, and properly retained
Committee minutes, delegation agreements, and oversight practices often matter more for auditors than the schedules themselves.
Controls Don’t Have to Be Complex
Audit readiness does not require sophisticated internal control frameworks. What matters most is consistency and clear evidence.
Auditors typically look for:
- Review of census data and eligibility determinations
- Reasonableness checks on contributions, distributions, and forfeitures
- Documented review of reports from service providers
If controls exist only in practice and aren’t documented, audit issues are almost inevitable.
Understanding Service Organization Reliance
Most plans rely heavily on service organizations, making SOC 1 reports a critical part of audit readiness.
Sponsors should understand:
- Which controls are handled by the service provider
- Which complementary user entity controls remains their responsibility
- Whether SOC reports are reviewed and exceptions addressed
Simply receiving a SOC report is not enough, a documented review is essential.
Documentation Is Often the Weakest Link
Many plans run smoothly in practice but fail to document key actions. From an audit perspective, if reviews or approvals aren’t documented, it’s as if they never happened.
Audit readiness improves significantly when documentation is timely, consistent, and retained in an organized, accessible way.
A Year-Round Mindset
Audit readiness isn’t a process that begins after year-end. Plans with smoother audits treat readiness as an ongoing commitment, supported by governance, controls, and documentation throughout the year.
Schedules support the audit. Governance supports the plan.
How Can Our Unique Perspectives Assist You?
At McConnell Jones, we partner closely with plan sponsors to strengthen audit readiness in practical, scalable ways without unnecessary burden. If you’d like to discuss your plan’s audit readiness or governance practices, please contact Sharjeel Ahsan, EBP Audit Partner, at sahsan@mjlm.com.
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