Auditor communications can provide valuable information to help you improve plan operations – and they can also help you meet your fiduciary responsibilities to plan participants.
As a value-added service, your auditor may make other communications not required by professional standards. Your auditor may wish to communicate deficiencies in internal control or other issues or recommendations for improvement noted during the audit. Such comments generally are included in a “management letter.” Management letters generally would document the deficiency in internal control or other issue and include a recommendation for remedying the situation. Some auditors may prefer to communicate such matters verbally in a face-to-face meeting.
As a plan sponsor, administrator, or trustee, your fiduciary responsibilities include planning administration functions such as maintaining the financial books and records of the plan and filing a complete and accurate annual return/report for your plan on a timely basis.
The communications discussed above will help keep you apprised of issues that may need to be addressed for you to fulfill these responsibilities. In addition, because errors and fraud can and do occur, it is important that your plan management establish safeguards to prevent or detect such errors and fraud. This can be accomplished by implementing effective internal control over financial reporting.
Communications about internal control matters identified in the audit will help improve your awareness of the importance of internal control over financial reporting, and will enable you to assess the costs and benefits of implementing adequate controls that minimize risk for misstatements in your financial reporting process, weigh the risks of each significant deficiency or material weakness, and determine whether and how to address them.