SALARY REDUCTION PLAN
PURPOSE: The purpose of this audit program is to define what areas of the 401(k) Plan are to
be tested and verified by the Internal Audit staff. It also provides the steps and procedures
needed to carry out the testing and verification.
ORGANIZATION: The audit program is broken down into three main areas:
1. Participants’ Accounts - Several computer generated reports pertaining to participants’
account are tested to verify the accuracy of the participants’ eligibility and contributions.
2. Financial - Testing and verifying externally generated records.
REF INIT DATE
Randomly select 50 participant accounts per quarter and test the
I. Participant contribution percentages are being properly deducted
and credited to their account.
II. Clinic matching amounts are properly calculated.
III. Employee contribution is properly calculated.
IV. Test one Master Payroll file per quarter to verify the information
given to bookeeper is accurate.
V. At year end, test maximum deferrals, and compensation rules.
Of the above 50 participants, those that have outstanding loans
Have the following procedures followed:
I. Compare outstanding loan balance from 401(k) Loan Report to
the amount confirmed by bookkeeper.
II. Compare the bi-weekly loan payment amount from the 401(k)
Report to the amount confirmed by bookkeeper.
REF INIT DATE
Identify new hires, department transfers and rehires. Review
eligibility dates for accuracy.
I. Reconcile bookkeeper to the Investment Managers’ statements.
II. Reconcile payables. Review managers’ fees for
III. Reconcile participants’ equity.
IV. Reconcile allocation of contributions between participants
funds. Trace contributions from 401(k) report to company
general ledger to bookkeeper receipt of funds.
V. Review other plan expenses and revenue (administrative).
VI. Recalculate 15 interest and dividend accruals for
reasonableness. Test dividend rates to an outside source.
Review subsequent transactions to insure all accruals are
Year End Review
I. Confirm securities held with managers.
II. Request and examine audit report of the Northern Trust. Note
internal control weaknesses.