lets say an irs auditor is scheduled to walk in your door in order to audit a plan and while reviewing the files you notice an operational error. if you bring it to the attention to the auditor can you take advantage of SCP or even VCP or do you have to resolve the situation in audit cap because the plan is under examination?

You can correct insignificant operational failures using SCP "even if the plan or Plan Sponsor is Under Examination and even if the Operational Failure is discoveered by an agent on examination." See Rev. Proc. 2003-44, section 8.01.

For significant failures, you lose your ability to use SCP on the first day the plan is "Under Examination." 2003-44, 9.02(1), (3). If the auditor is at the door, you are already under examination, since the Rev. Proc. defines that as the date the plan receives an oral or written notification of an impending Employee Plans examination. 2003-44, 5.03(1), (2). I presume the auditor scheduled the site vist some time ago, after the plan received notice of the audit.