Unit
- Definition: An agreed-upon procedures engagement is a professional service where a practitioner performs specific procedures on subject matter and reports factual findings, without providing an overall opinion. The procedures and criteria are agreed upon by the engaging party and specified users.
- Primary purpose: AUP engagements serve users who need targeted, factual information about particular aspects of financial data or operational processes. They offer a flexible alternative to full audits when stakeholders have specific concerns or limited scope requirements.
- Key characteristics: The practitioner does not provide assurance; instead, they report on findings from procedures. Users evaluate the findings themselves. AUP engagements can cover financial statements, internal controls, compliance, or operational data.
- Common applications: AUP is frequently used in loan covenant compliance verification, grant expenditure reviews, royalty audits, property lease analysis, and pre-acquisition due diligence. Each engagement is customized to user needs.
- Role of the practitioner: The practitioner must be independent and competent. Their responsibility is to perform the agreed procedures with due care and report findings accurately. They do not design the procedures unless agreed.
- User expectations: Users understand that the practitioner is not providing an opinion. They analyze the factual findings in the context of their own criteria and make decisions accordingly.
- Comparison to audits: Unlike audits, AUP engagements do not require an opinion on fairness or compliance. They are less formal, often faster, and more cost-effective for limited-scope needs.
- Professional standards: AUP engagements are governed by SSAE No. 18 (Attestation Standards) and ISRS 4400. These standards outline the practitioner's responsibilities, reporting requirements, and performance guidelines.
- Engagement letter requirements: The practitioner must obtain a written engagement letter signed by all specified parties. This letter documents the agreed procedures, the subject matter, the basis of accounting or criteria, and the intended distribution of the report. It also clarifies that no assurance is provided and that the report is restricted to those parties.
- Reporting format and content: The AUP report lists each procedure performed and the corresponding factual finding. It does not include any conclusions or recommendations. The report must state that the engagement was conducted in accordance with applicable standards and that the report is intended solely for the specified users.
- Limitations and restrictions: Because the procedures are customized, results may not be comparable across engagements. Users cannot extrapolate findings to unexamined areas. The report is restricted to the parties who agreed to the procedures and cannot be distributed to others, reinforcing its limited purpose.
- Role of specified users in procedure design: Specified users often help define the exact procedures to be performed, based on their specific information needs. This collaboration ensures the engagement remains focused and relevant, but the practitioner must verify that the procedures are feasible and that the subject matter is suitable for such an engagement.
Regulatory Requirement
Regulation: SSAE No. 18 / ISRS 4400
These standards require that the practitioner obtain agreement from all specified parties on the procedures to be performed and the form of the report. The report must clearly indicate that it is restricted to those parties and is not intended for others.
Quick Revision
- AUP engagements involve performing specific procedures and reporting factual findings, not providing assurance.
- Procedures and criteria are agreed upon by the engaging party and specified users.
- Common uses include loan covenant compliance, grant audits, and due diligence.
- Governed by SSAE No. 18 and ISRS 4400.
- The practitioner must be independent and adhere to professional standards.