Custodial 403(b)(7) plan, not TRUSTEED! The auditor is requesting a certification to allow a limited scope audit (similiar to trusteed qualified plans).
My understanding is that this is not only not applicable, but cannot be done.

Any suggestions or input (specifically regulations sitations)?

Suggest to them that they should take the time to read the section that they would be citing in any limited scope audit opinion: ERISA reg Section 2520.103-8. It says that their exam need not extend to "any statement or information prepared and certified by a bank or similar institution or insurance carrier." No bank or insurance company, no limited scope audit. Note its not a custody versus trustee issue. A bank can certify assets that it has custody of even if its not a trustee. But I assume you simply have brokerage accounts?

Why is an audit needed for a 403(b) plan?

Some do an audit of plans even if not required -- for employees, etc.

Then I would submit that the auditor is either being difficult or is very ill-informed.

They want to do what is not required, but only part of it? And they want someone else to sign off on responsibility for assets when in fact nobody has undertaken such responsibility.

Kind of like going to the moon and insisting that the man in the moon autograph your moon rocks. It ain't gonna happen.

Seems a bit odd to me. I'd agree with you LVan

If the auditor is not comfortable with the information that you have been provided, have them go to the AICPA Employee Plans Audit Quality message board and post their question. Then they will get the exact same information as you have recieved here from other CPAs. That is the purpose of that section - to raise audit quality. It is www.aicpa.org/ebpaqc. But, the audit firm has to be a member of the audit quality center to use the message board. If they aren't a member of the audit quality center, your client may want to encourage them to join.