Audits of 401(k) Plans

Chapter 4 AUDITING THE STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS

LEARNING OBJECTIVES

After completing this chapter, you should be able to do the following:

•     Recognize the requirements of FASB ASC 820, Fair Value Measurement.

•     Recognize the line items of the Statement of Net Assets Available for Benefits.

•     Identify audit procedures and presentation requirements for plan investments and other plan assets.

•     Recognize the requirements of FASB ASC 962-325.

INTRODUCTION

The Statement of Net Assets Available for Benefits details the assets and liabilities of the 401(k) plan. It is comparable to the balance sheet of most other entities' financial statements in that it presents the net assets available for benefits (assets minus liabilities) at a particular point in time (plan year-end). The net assets provide a basis to determine the plan's future ability to pay benefits when they are due. The statement of net assets available for benefits should be prepared using the accrual basis of accounting in order to be in compliance with accounting principles generally accepted in the United States of America. However, financial statements prepared on a special reporting framework are acceptable to the DOL for purposes of Form 5500 filing. See chapter 7, “The Auditor's Report and Financial Statement Disclosures,” for additional information.

Defined contribution plans provide benefits to participants based on the amounts contributed to or deducted from their individual ...