Hiring a Payroll Auditing Firm, Question 10: Do you Charge a Flat-Rate Fee Per Audit or an Hourly Rate?

Posting by Larry Beebe, CPA

A major problem with a flat-rate audit is that it encourages audits with no findings.

If the auditor receives the same fee regardless of findings, the auditor is unlikely to spend time looking for deficiencies. Instead, a plan may want to put a cap or ceiling on its audit costs. One way to do this is to agree on an hourly rate with a cap on the number of hours for each audit. If the auditor determines more hours are needed, the time must be cleared with the plan administrator, who considers the findings encountered thus far. The audit findings may be worth the extra hours.

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