In certain circumstances, businesses may need to hire CPAs to perform agreed-upon procedures (AUPs) instead of (or in addition to) a review or an audit. AUPs are a type of attestation engagement “in which a practitioner performs specific procedures on subject matter and reports the findings without providing an opinion or conclusion,” according to the standards set forth by the American Institute of Certified Public Accountants. AUPs generally cost less and take less time than a review or an audit. Plus, their versatility allows them to address nonfinancial matters and dig deeper into items reported on your financial statements.
The basics
In general, an AUP engagement uses procedures similar to a review or an audit but on a smaller and limited scale and with no assurance on the part of the CPA. An engagement letter is used to outline the scope and nature of the specific procedures that will be performed. Upon completing AUPs, CPAs issue a written report that 1) describes the procedures performed and 2) summarizes the findings from each procedure. The accounting standards also require an AUP report to contain the following:- A title that includes the word “independent” to show the report is from an independent accountant,
- Identification of the engaging party, the subject and the responsible party (if it’s not the same as the engaging party),
- The intended purpose(s) of the engagement,
- A statement that the practitioner didn’t conduct an examination or review,
- A statement that the practitioner doesn’t express an opinion or conclusion, and
- Reservations or restrictions concerning procedures or findings.
AUPs in the real world
Examples of areas where an AUP can provide clients and third parties with valuable insights include:- Internal control evaluations,
- Grant compliance,
- Franchise agreement compliance,
- M&A due diligence,
- Construction project progress and spending practices, and
- Royalty payments under a licensing agreement.
