Agreed-Upon Procedures Engagements: A Middle Ground Between Audits & Consulting Services

KPM A&A Update link to blog.

07 Jun Agreed-Upon Procedures Engagements: A Middle Ground Between Audits & Consulting Services

Your CPA offers a wide variety of services. An audit is a familiar type of attestation service that provides a formal opinion about whether the company’s financial statements conform to U.S. Generally Accepted Accounting Principles.

Consulting services, in contrast, provide advice or technical assistance that is only for internal purposes. That is, lenders and other third parties cannot rely on the findings, conclusions, and recommendations presented during a consulting project.

If you need a report that falls somewhere between these alternatives, consider an agreed-upon procedures (AUP) engagement.

Scope

An AUP engagement uses procedures similar to an audit but on a limited scale. It can be used to identify specific problems that require immediate action. When performing an AUP engagement, your CPA makes no formal opinion; they simply act as a fact finder. The report lists:

  • The procedures performed
  • The CPA’s findings

It is the user’s responsibility to draw conclusions based on those findings. AUP engagements may target specific financial data (such as accounts payable, accounts receivable, or related-party transactions), nonfinancial information (such as a review of internal controls or compliance with royalty agreements), a specific financial statement (such as the income statement or balance sheet), or even a complete set of financial statements.

Advantages

AUP engagements boast several advantages. They can be performed at any time during the year, and they can be relied on by third parties. Plus, you have the flexibility to choose only those procedures you feel are necessary, so AUP engagements can be cost-effective.

Specifically, AUP engagements can be useful:

  • In mergers and acquisitions due diligence
  • When a business owner suspects an employee of misrepresenting financial results
  • To determine compliance with specific regulatory requirements, such as the Health Insurance Portability and Accountability Act of 1996 or the Federal Information Security Management Act

In addition, lenders or franchisors may request an AUP engagement if they have doubts or questions about a company’s financials or the effectiveness of its internal controls or if they want to check on the progress of a distressed company’s turnaround plan.

Contact us

AUP engagements can be performed to supplement audits and consulting engagements or as a standalone service. We can help you customize an AUP engagement that fits the needs of your business and its stakeholders.