ESOP Audit

An ESOP audit is an independent examination of the financial statements of an employee stock ownership plan, conducted to satisfy the reporting requirements of ERISA and the Department of Labor. It covers the plan’s holdings of employer securities, contributions, share allocations, distributions, and internal controls, and results in an opinion on whether the financial statements are fairly stated.

ESOP audits carry considerations that other plan audits do not, including the ESOP loan, the annual allocation of shares to participants, and the valuation of employer securities. Note that the plan is audited; the sponsor’s stock valuation is a separate exercise performed by an independent appraiser.

The requirement is generally tied to plan size, and it applies to leveraged and non-leveraged ESOPs alike.

• Plans with 100 or more eligible participants generally require an audit.
• Participants are counted based on those with account balances at the beginning of the plan year.
• The 80-120 participant rule lets some plans keep filing as they did the prior year.
• Both leveraged ESOPs with outstanding loans and fully allocated ESOPs are covered.

• Employer securities held by the plan and their reported value.
• The ESOP loan, including principal, interest, and release of shares.
• Annual allocation of shares and cash to participant accounts.
• Contributions, distributions, diversification elections, and repurchase activity.
• Internal controls and compliance with the plan document.

Modus helps you get your ESOP audit done at the speed of business. Its AI-native platform automates the most time-intensive fieldwork and reconciles share allocations, loan activity, and the appraiser’s valuation report, which is how a Modus-supported audit can target a turnaround of roughly four weeks. Workpapers are source-linked, so each figure traces back to its supporting document.

That efficiency changes your experience. Modus’s platform cuts the document requests and questions your team fields, so your finance staff and trustee spend less time servicing the audit.

• Top-firm audit rigor at a middle-market price.
• A target turnaround of roughly four weeks to keep your Form 5500 deadline comfortable.
• Source-linked workpapers that tie share allocations and loan activity to source records.
• Up to roughly 50% fewer questions for your team during fieldwork.