What Procedures Are Performed in a Limited Scope Audit?

Employee Benefit Plan Services

What Procedures Are Performed in a Limited Scope Audit?

The primary difference between a full scope and a limited scope audit is that a limited scope audit does not require substantive testing of investments such as year-end market values, interest and dividends and realized and unrealized gains/losses on investments. Instead, auditors retained to perform a limited scope audit, obtain certification from either a bank or insurance company, whereby the bank or insurance company certifies the “completeness and accuracy” of the investment data accompanying the certification. Upon receiving an acceptable certification, the auditor would limit their procedures to comparing the certified data to amounts presented in the financial statements.

So the natural question would be what exactly is done in a limited scope audit of an employee benefit plan?

Other than those audit procedures performed on investments in a full scope audit, limited scope audits and full scope audits include the same procedures. These procedures primarily relate to the other operational aspects of the plan and include testing of participant records, such as the allocation of contributions and earnings to individual participant accounts, employee and employer contributions, benefit payments and an evaluation of internal controls over financial reporting (although controls are not required to be tested in either a full scope of limited scope audit). A limited scope audit focuses on the compliance aspects of these areas including the plan’s overall compliance with relevant tax law, the timeliness of deposits of participant contributions, the calculation of the employer matching contribution in accordance with the plan document and properness of participant loans and benefit payments in accordance with The Employee Retirement Income Security Act of 1974 (“ERISA”).

If you have any questions regarding what a limited scope audit entails or what is required of the Plan Sponsor during the course of an audit, please contact one a member of our Employee Benefit Plan Services Group by filling out the form below.

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The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals for your plan’s individual facts and circumstances.

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