How to Switch 401(k) Auditors
Reasons to change firms, the timeline that avoids a rushed first audit, RFP steps, the questions that separate specialists from occasional auditors, and a transition checklist.
Last updated · Source data: plan year 2024 Form 5500 filings
How do you switch 401(k) auditors?
Run an RFP in the plan year’s final quarter or just after year-end, sign the engagement letter by February (calendar-year plan), and authorize the outgoing firm to talk to the successor and share working papers. The switch takes weeks; starting in September is the common mistake.
Why do plan sponsors switch auditors?
| Trigger | What it looks like | Timing |
|---|---|---|
| DOL finds the audit deficient | EBSA’s Office of the Chief Accountant rejects the Form 5500 or requests a corrected audit; the sponsor has a 45-day window to respond. | Immediate. A second deficient report from the same firm is the worst outcome; most sponsors re-engage elsewhere. |
| The firm is leaving the practice | Fewer plan audits each year, a merger or private-equity deal, the retirement of the one partner who signs them, or a poor peer review on plan engagements. | Before the next plan year begins, so the successor can plan fieldwork. |
| Missed or compressed deadlines | Fieldwork that starts in September, opinions dated October 14, Form 5558 filed every year by default. | Next cycle. Start the RFP as soon as the current filing is in. |
| Fee out of line with scope | Increases well above the 5–10% annual market drift with no change in plan size, complexity, or record quality. | Next cycle. Benchmark before renewing; see the cost guide. |
| No senior involvement or constant staff turnover | A new team each year re-learns the plan; questions already answered come back; partner never attends the closing meeting. | Next cycle. |
| Plan complexity outgrew the firm | Form 11-K filing, employer stock, a merged plan, multiple payrolls, or hard-to-value assets that the firm has not audited before. | Before the year those features first appear in the financial statements. |
| Independence conflict | A firm partner joins the sponsor’s board, the firm takes on a prohibited service, or a financial interest arises (DOL Interpretive Bulletin 2022-01). | Immediate; the firm cannot sign. |
| Committee policy | A periodic RFP (commonly every five to seven years) adopted as a documented fiduciary practice. ERISA does not require rotation. | On the policy schedule. |
Selecting an auditor is a fiduciary decision
The Department of Labor’s guidance for plan sponsors, Selecting an Auditor for Your Employee Benefit Plan, treats hiring the auditor as a fiduciary act subject to ERISA’s prudence standard. The practical consequence is documentation: a written scope, a comparison of candidates on experience and not only fee, and minutes recording why the committee chose the firm it chose. The same guidance points sponsors to the firm’s volume of plan audits, its training and peer review, and its independence — the questions in the table further down.
Volume matters because the market is lopsided. In plan year 2024, 3,956 firms audited at least one retirement plan, but 1,552 of them audited exactly one, and only 19 firms audited 500 or more. The 100 largest practices held 58.0% of retirement plan engagements. The DOL’s audit quality study found deficiency rates of 76% among firms performing one or two plan audits a year, against 12% among the largest practices — which is why a switch is the moment to move toward demonstrated volume, not away from it. The national rankings and state directories show each firm’s count from its own signed filings.
Rankings derived from U.S. Department of Labor Form 5500 filings, plan year 2024. Read the full methodology.
Timeline relative to plan year end
| When | What happens | Who |
|---|---|---|
| October – December (plan year being audited) | Decide to switch; define scope; shortlist three to five firms with real plan-audit volume; issue the RFP. | Plan committee |
| January | Proposals, reference checks, peer review reports, interviews with the proposed engagement team. | Plan committee |
| February | Committee selects and records the decision in minutes; sign the engagement letter; notify the outgoing firm in writing and authorize it to respond to the successor. | Plan committee, sponsor |
| February – March | Successor–predecessor communication (required by AU-C 210 before acceptance); successor reviews predecessor working papers for opening balances (AU-C 510); planning and document request list. | Successor auditor |
| April – June | Fieldwork. Successor also updates its understanding of the recordkeeper, payroll, and SOC 1 environment from scratch. | Successor auditor, sponsor |
| July | Draft financial statements and draft Form 5500 to the auditor; file by July 31 or extend with Form 5558. | Sponsor, preparer |
| August – October 15 | Close out and file on the extended deadline if used. | All |
| Off-cycle: after a DOL deficiency notice | Engage a successor within days, not weeks; the corrected audit and amended Form 5500 are due inside the DOL’s response window. | Sponsor |
Shift every row by the same offset for a fiscal-year plan: the audit is due with Form 5500 on the last day of the seventh month after the plan year ends, extendable 2½ months by Form 5558. See the deadline guide.
Running the RFP
- Define the scope in one page. Plan type and number of plans, participant count with balances, net assets, recordkeeper, custodian and whether it will certify under ERISA Section 103(a)(3)(C), payroll systems, employer stock or Form 11-K status, and any known problems (late deposits, a merger, prior findings).
- Shortlist by evidence, not by inbox. Pull three to five firms with meaningful plan-audit volume from the state directory for your sponsor’s state, and check each firm’s profile for client sizes and opinion mix.
- Send the same package to every firm. Prior-year audited financial statements, the latest Form 5500, plan document and amendments, the management letter, and the SOC 1 reports you already hold. Comparable information produces comparable quotes.
- Ask the ten questions below in writing and require written answers. Follow with a call with the people who will actually do the work, not only the relationship partner.
- Score on experience, team, timing, and fee — in that order. Record the scores. The cheapest quote from a firm with a handful of plan audits is the most expensive outcome if the DOL rejects the report.
- Check references and the peer review report for the two finalists; ask references specifically about responsiveness and whether the report was delivered on the promised date.
- Decide, minute it, sign. Engagement letter signed by February for a calendar-year plan; then the transition checklist.
What to ask candidate audit firms
| Question | Why it matters |
|---|---|
| How many employee benefit plans did you audit last year, and how many 401(k) plans of our size? | The DOL’s audit quality study found a 76% deficiency rate among firms auditing one or two plans a year versus 12% at the largest practices. Verify the answer against the firm’s Form 5500 count in this directory. |
| Is the firm a member of the AICPA Employee Benefit Plan Audit Quality Center (EBPAQC)? | Membership requires designated partners, plan-specific training, and internal inspection of plan audits. Not a guarantee of quality, but its absence at a firm doing plan audits is a signal. |
| What was the rating on your most recent AICPA peer review, and did it include an employee benefit plan engagement? | Peer reviews are rated pass, pass with deficiencies, or fail. Plan audits are must-select engagements when a firm performs them, so the report should name one. |
| Has the DOL or the AICPA cited any of your plan audits as deficient in the last five years? | A direct question with a documentary answer. Ask for the resolution if the answer is yes. |
| Who will do the work — partner, manager, staff hours — and how long has that team audited plans together? | Continuity is what makes year two cheaper and cleaner than year one. Ask for the proposed team’s tenure and the firm’s plan-audit turnover. |
| Have you audited plans on our recordkeeper and payroll platforms? | Familiarity with the recordkeeper’s reports, certification format, and SOC 1 controls removes weeks of back-and-forth. |
| Does your fee assume an ERISA Section 103(a)(3)(C) audit, and what is excluded? | Quotes are only comparable on the same scope. Ask what triggers a change order: additional payroll systems, a plan merger, an 11-K filing, or late deliverables. |
| What is your fixed fee for three years, and what is the first-year premium? | A multi-year fixed fee with a stated year-one premium exposes the real cost of switching. See the cost guide for the typical 10–25% premium. |
| What is your fieldwork schedule and report date commitment? | The answer should be a month, not “before October 15.” |
| Are you independent of the plan and the sponsor under AICPA rules and DOL Interpretive Bulletin 2022-01? | Independence is a licensure and ERISA condition; the firm’s written confirmation goes in the engagement file. |
Transition checklist
| Task | Owner | When | Why |
|---|---|---|---|
| Record the decision and its basis in plan committee minutes | Plan committee | At selection | Selecting the auditor is a fiduciary act; the DOL’s auditor-selection guidance expects a documented, prudent process. |
| Sign the successor’s engagement letter, including the SAS 136 management acknowledgments | Sponsor | February | Confirms scope, election, fee, deliverables, and timing. |
| Notify the outgoing firm in writing | Sponsor | Same week | Ends the prior engagement cleanly and starts the working-paper request. |
| Authorize the predecessor to respond fully to the successor’s inquiries | Sponsor | Same week | AU-C 210 requires the successor to make these inquiries before accepting; the predecessor needs the sponsor’s consent to answer. |
| Authorize release of predecessor working papers | Sponsor | Same week | Lets the successor rely on prior-year evidence for opening balances (AU-C 510) instead of re-performing it. |
| Provide prior-year audited financial statements, management letter, and reportable findings | Sponsor | Kickoff | Sets the successor’s risk assessment and shows what remains open. |
| Give the successor SOC 1 report access and update recordkeeper and custodian contacts | Sponsor | March | Confirmations, certifications, and SOC 1 bridge letters route to the new firm. |
| Request the ERISA Section 103(a)(3)(C) certification in the successor’s name and form | Sponsor | March | Certification wording and timing are the most common first-year delay. |
| Agree the document request list and a dated response calendar | Sponsor, auditor | March | A first-year list is longer; see the audit checklist. |
| Update Schedule H, line 3 with the new accountant’s name and EIN | Form 5500 preparer | Filing | The filing must name the firm that actually signed. |
| Calendar July 31 and October 15 with internal cut-offs four weeks earlier | Sponsor | Kickoff | The switch is only complete when the first filing is on time. |
Switching auditors: common questions
Does ERISA require plans to rotate auditors?
No. Neither ERISA nor Department of Labor regulations impose auditor rotation for employee benefit plans. Some plan committees adopt a periodic RFP — commonly every five to seven years — as a documented fiduciary practice, and many benchmark fees more often than that.
Can the company’s financial statement auditor also audit the 401(k) plan?
Usually, yes, and it is common. The firm must be independent of the plan and the sponsor under AICPA rules and DOL Interpretive Bulletin 2022-01 (29 CFR 2509.2022-01), and it should have a genuine plan-audit practice; auditing the sponsor does not by itself make a firm competent in ERISA plan audits.
Will the new auditor re-audit prior years?
Not normally. Under AU-C 510 the successor obtains evidence about opening balances — often by reviewing the predecessor’s working papers — and reports only on the current year. A re-audit of a prior year arises only when the Department of Labor rejects that year’s audit and requires a corrected report.
How long does switching 401(k) auditors take?
The selection itself takes six to ten weeks from RFP to signed engagement letter. The first audit with the new firm then takes longer than a recurring year — plan on an extra two to four weeks — because the successor establishes opening balances and its own understanding of the recordkeeper, payroll, and control environment.
What if the DOL rejected our Form 5500 because of the audit?
Respond inside the window stated in the notice, typically 45 days. The plan needs a corrected audit report that meets professional standards and an amended Form 5500. Sponsors in this position commonly engage a firm with substantial plan-audit volume, because a second rejection exposes the plan to penalties assessed as if the return had never been filed.
Should the successor firm be located in our state?
It is not required. Plan audits are performed under national standards and mostly from recordkeeper and payroll data, so many established practices audit plans in dozens of states. The state directories on this site show which firms have real engagement volume where your plan is sponsored.
This page summarizes ERISA, Department of Labor guidance, and AICPA auditing standards in plain language for research purposes; confirm specifics with your ERISA counsel or auditor.