What is a Courtesy Audit?
A courtesy audit is performed within the first six to twelve months of a new employer’s participation in a trust. Although courtesy audits are similar to standard compliance audits, the key objective of a courtesy audit is to provide new employers with feedback and recommendations to ensure they are properly contributing to the trust.
Courtesy Audit Procedures
The testing procedures performed during a courtesy audit are substantially the same as a standard compliance audit; however, the time period is obviously shorter and the focus is on the employer’s understanding of the trust’s reporting requirements, as stipulated in the collective bargaining, subscriber’s and/or participation agreements. When warranted, the plan auditor will provide the employer with training and process improvement suggestions. Often, plans will waive interest, liquidated damages and testing fees for errors found during the courtesy audit.
Benefits of a Courtesy Audit
The primary benefit of a courtesy audit is to correct an employer’s reporting issues early to avoid costly findings at a later date. In Lindquist LLP’s experience, employers appreciate the on-site training regarding trust reporting requirements. When reporting problems are discovered early, changes can be implemented and employers can avoid paying interest and liquidated damages.
Courtesy audits are a “win-win,” reducing both trust expenses and employer liability by identifying potential reporting problems early. Not only do courtesy audits assist trustees in meeting their fiduciary responsibilities, they also assist employers in meeting their responsibility to properly report to the trust.
Melissa Farley is a payroll compliance manager in Lindquist LLP’s San Ramon, California office. Melissa has more than 20 years of payroll compliance auditing experience, and she manages payroll compliance testing programs for 18 trust funds. She is a graduate of Chico State University.
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