The AICPA’s Auditing Standards Board (“ASB”) issued a revised attestation standard in December 2019. The revised standard gives accountants more flexibility when performing agreed-upon procedures (“AUP”) engagements.
What is an AUP engagement?
An AUP engagement is a type of limited assurance engagement in which a CPA performs specific procedures on a particular subject matter and reports the findings without providing an opinion or conclusion. Instead, an AUP report details the procedures performed and the related findings.
The subject matter covered in an AUP engagement may be financial or nonfinancial information. Examples include a review of transactions related to cash receipts or cash disbursements within an organization, or the effectiveness of the controls around accounting processes.
The nature, timing and extent of the procedures performed in these engagements may vary. Therefore, the engaging party must agree to the procedures and acknowledge that they are appropriate for the engagement’s intended purpose before issuance of the AUP report.
The updated guidance — Statements on Standards for Attestation Engagements (SSAE) No. 19, Agreed-Upon Procedures Engagements — is effective for AUPs dated on or after July 15, 2021. It will supersede SSAE No. 18 AT-C section 215, “Agreed-Upon Procedures Engagements,” and amend AT-C section 105, “Concepts Common to All Attestation Engagements.” Early adoption is permitted.
What’s the biggest change?
The revised standard brings several key changes to current practice. Most notably, an accountant will be allowed to report on a subject matter without obtaining a written assertion from the responsible party that the responsible party complies with an underlying criterion, such as laws or regulations.
With some engagements, the responsible party may be the engaging party. But for other engagements the responsible party is essentially the person or group that provides the accountant with a written assertion about the subject matter. In some cases, the responsible party for the subject matter may not be readily identifiable. The AICPA felt the need to give accountants flexibility when examining or reviewing certain documents if the engaging party cannot appropriately measure or evaluate them.
How else has the attestation guidance been tweaked?
The revised standard will also:
- Allow CPAs to develop procedures over the course of an AUP engagement,
- Allow CPAs to develop or assist in developing the procedures,
- Remove the requirement for intended users to take responsibility for the sufficiency of the procedures and, instead, require the engaging party to simply acknowledge the appropriateness of the procedures before the issuance of the practitioner’s report, and
- Permit the CPA to issue a general-use report.
“In today’s increasingly complex business environment, there is a great and apparent need for auditors’ expertise in rapidly evolving subject matters,” AICPA Chief Auditor Bob Dohrer said in a statement. “By allowing the practitioner to assist in developing procedures, not requiring an assertion by a responsible party and permitting general-use reports, the [AUP] service delivers enhanced value and relevance to report users.”
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- What is an Agreed-Upon Procedures Engagement?
19 Jul 2018By: Jasmine Baker and Donnie Springer
CPA firms have the capability of providing a whole suite of services to their clients. Besides audits, one of the services you may be familiar with is agreed-upon procedures. But what exactly is an agreed upon procedure engagement and how can it benefit your organization?
An agreed-upon procedures engagement is a service in which a CPA is to report findings based on specific procedures agreed upon beforehand. The procedures are agreed upon in advance and can encompass a wide variety of topics, which we like to refer to as “subject matter”. Some examples of such AUP engagements that our firm often performs are: payroll compliance testing for a multi-employer benefit plan, medical claims testing for a third-party service provider or a health and welfare plan, cost allocation studies, and testing for accuracy of expenses.
The procedures are determined by your organization and may be as limited or as extensive as desired but should not include procedures that are open to varying interpretations. The chart below lists examples of appropriate procedures your CPA can perform for you versus those that would be inappropriate.
Appropriate Procedures |
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Inappropriate Procedures |
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How can an AUP Engagement Benefit my Organization?
One of the benefits of engaging a CPA to perform such work is that the findings are independently
derived with no bias. There is flexibility in the nature, timing, and extent of the AUP and the work can be tailormade to fit your needs. You know your organization and can direct a CPA to perform procedures in a certain area—perhaps an area of concern, a new activity, or just a closer look at something. It is also important to note that in an AUP engagement, the CPA does not provide an opinion or a conclusion. Instead, the CPA provides a report listing the findings resulting from the procedures that are agreed-upon.
What Set of Standards do CPAs Follow when Conducting AUP Engagements?
CPAs follow a set of standards called Statements on Standards for Attestation Engagements (SSAE) when conducting AUP engagements. There were changes made to these standards effective May 1, 2017, as a result of SSAE No. 18, which was issued by the American Institute of Certified Public Accountants (AICPA) in April 2016. Some of the more significant changes affecting agreed-upon procedures engagements that you may have seen are summarized below:
New Terminology |
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New Requirements |
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New Reporting Changes |
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Conclusion
Although the technical requirements of an AUP engagement changed with SSAE No. 18, as outlined above, the basic overall objective remains the same. An independent CPA performs procedures that are agreed upon in advance based on your specific needs, and reports on the findings at the conclusion of the testing. Could an AUP engagement be valuable to your organization? Please contact us at (925) 277-9100 for more information.
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