How audit firms win first-year 401(k) audit clients
Every year about 2,000 retirement plans grow past the large-plan threshold and need an independent auditor for the first time. Nobody holds these engagements yet. This guide uses public Form 5500 data to show when those sponsors decide, who influences the choice and what that means for a firm that wants to be asked.
Why first-year plans are the open part of the market
A plan that already has an auditor has an incumbent to replace. A first-year plan has none. We checked this in our back-test. For the list of plans flagged for plan year 2024, where our data also covers the year before, 98.9% of the audited returns that have arrived so far were signed by a firm that had not audited the plan in the years we can see.
The engagements are also spread widely. Of the 2,134 plans the rule flagged for plan year 2023, 1,737 (81.4%) filed an audited Form 5500 for plan year 2024. Those audited returns were signed by 620 different audit firms. The most active single firm signed 3.6% of them, the ten most active together 22.8%, and 393 firms signed exactly one. No firm owns this market; small and mid-sized practices win these plans every year.
The timeline: from crossing 120 participants to the filing deadline
Under the 80-120 rule a plan that filed as a small plan generally needs its first audit once it starts a plan year with 121 or more participants with account balances (how the audit requirement works). Because the count at the start of a year equals the count at the end of the year before, the trigger shows up one year early, in the plan's Form 5500-SF.
- Signal: the short form for the year in which the plan crossed 120 reaches the public DOL data. In the back-test, 89.3% of flagged plans were visible by October 31 of the following year.
- Deadline: the first audited Form 5500 for a calendar-year plan is due July 31 of the next year, or October 15 with a Form 5558 extension.
- Reality: most sponsors use the extension. In the back-test, 63.6% of the first audited returns arrived in October and only 4.5% by July 31. The median time from the short-form filing to the audited return was 14.5 months (middle half 12.2 to 15.9 months).
For the plans on today's list, plan year 2026 is generally the first audited year: the filing is due July 31, 2027, or October 15, 2027 with an extension. Sponsors usually engage an auditor somewhere in between, often after the plan year closes. That leaves a window of several months in which an introduction arrives before the decision, not after it.
Who decides, and who influences the choice
At a company with 120 to a few hundred employees the plan sponsor's decision usually sits with the CFO, the controller or the head of HR, often the person who also handles the Form 5500 with the plan's providers. Many of them hear about the audit requirement first from the plan's recordkeeper or third-party administrator (TPA), who may also suggest auditors they have worked with. Two practical consequences follow:
- Reach the sponsor directly and early, before a referral has already settled the question.
- Keep good relationships with the recordkeepers and TPAs active in your region; the auditor market tables on our state pages show which audit firms already work there.
What a first-year client is worth
Schedule H has reported the audit fee since plan year 2023, but only when the plan pays the auditor. Among 401(k) plans that reported the fee for plan year 2024, the median was $12,900 at 100-199 participants (middle half $9,500 to $16,800, 964 plans) and $14,500 at 200-499 participants (middle half $10,400 to $19,500, 1,461 plans). For the same plan and the same audit firm, the median fee rose 5.1% (100-199) and 5.3% (200-499) from 2023 to 2024. Plans whose sponsor pays the fee directly do not report it, so treat these figures as a market reference, not a quote. State figures: plan audit fees by size and state.
As long as the plan stays above the large-plan threshold it needs an audit every year, so a first-year client is a recurring engagement rather than a one-off fee.
A simple routine that works with public data
- Build the list. Find the plans in your area that crossed 120 participants with account balances and show no earlier audited return. The data is public in the DOL Form 5500 datasets; First Audit Radar does this matching every month.
- Contact early. A short, specific note to the sponsor (plan name, participant count, the deadline) reads very differently from a generic brochure.
- Follow up on a calendar. Most decisions fall between the end of the plan year and the extended deadline. Set follow-up dates rather than relying on memory.
- Stay compliant. The AICPA Code permits advertising and solicitation that is not false, misleading or deceptive (ET 1.600.001). How and whom you contact remains your decision; this is not legal advice.
Questions firms ask
Is the first-audit market dominated by a few large firms?
No. In our back-test, the 1,737 audited returns for plan year 2024 from plans flagged for plan year 2023 were signed by 620 different audit firms. The most active single firm signed 3.6% of them and the ten most active together 22.8%.
When do sponsors file their first audited Form 5500?
The filing is due July 31 after a calendar plan year, or October 15 with a Form 5558 extension. In our back-test, 63.6% of the first audited returns arrived in October and 4.5% by July 31, a median of 14.5 months after the short-form filing that put the plan on the list.
Do first-year plans usually keep an auditor they already had?
Almost never, because they had none. For the plan year 2024 list, where our data covers the earlier year, 98.9% of the audited returns that have arrived so far were signed by a firm that had not audited the plan in the years we can see.
May an audit firm contact plan sponsors directly?
The AICPA Code permits advertising and solicitation that is not false, misleading or deceptive (ET 1.600.001). The list is company-level public data; how and whom you contact remains your decision. This is not legal advice.
Back-test figures: DOL Form 5500 public datasets, files published through Sep 24, 2026 (method and limits). Fee figures: Schedule H line 2i(4), plan year 2024. Written by Christoph (Chris) Ploner, near Vienna, Austria. Not legal, tax or audit advice.