In the dynamic landscape of financial reporting and auditing, accounting professionals are constantly seeking innovative ways to provide assurance and insights to their clients. One approach that has gained prominence in recent years is Agreed-Upon Procedures (AUP) accounting engagements. AUP engagements offer a flexible and tailored approach to address specific financial and non-financial reporting issues, making them a valuable tool for a variety of stakeholders.

Agreed-Upon Procedures in accounting are a flexible and customizable tool that allows clients to obtain assurance on specific financial or operational aspects of their business without the full scope and cost associated with a traditional audit. These engagements are often used when clients have specific concerns, reporting requirements, or when third parties need assurance on certain information.

Understanding Agreed Upon Procedures Engagements

AUP engagements are a form of assurance engagement where the auditor performs specific procedures on financial or non-financial information and reports their findings without providing an overall conclusion. This is important because unlike a traditional audit, where the auditor expresses an opinion on the financial statements as a whole, AUP engagements focus on factual findings derived only from the agreed-upon procedures. The recipients of the report form their own conclusions from those findings. These procedures can be substantially less in scope than an audit or even a review. This is why it is very important that engaging parties, which could include management, investors, regulators, or other interested parties, agree exactly on what procedures will be performed up front.

Tailored Procedures for Specific Needs

One of the key advantages of AUP engagements is their flexibility. Organizations can engage auditors to perform procedures that target their specific concerns, risks, or objectives without spending time and money on areas that are not of concern.  This customization allows businesses to allocate resources efficiently and address areas of higher risk or complexity. For instance, a company preparing for an acquisition might request AUP procedures to validate the accuracy of specific financial information provided by the target company. By tailoring procedures to match the transaction’s unique circumstances, the acquiring company gains valuable insights into the target without the additional burden of a full audit. Other examples of AUP engagements include performing procedures over specific internal controls, confirming inventory counts, verifying certain balances, and contract compliance such as lease or royalty agreements.

Navigating Complexities through Collaboration

While AUP engagements offer flexibility, they also come with some complexities. Determining the appropriate procedures requires a deep understanding of the organization’s operations, risks, and reporting requirements. It’s crucial for both the engaging party and the auditor to collaborate closely to define the scope of procedures accurately and ensure expectations are aligned and potential issues are addressed effectively.

While AUP reports do not include an overall opinion, they do present factual findings that can guide decision-making in an era where standard audit procedures may not fully address the unique challenges organizations face.

Since AUP engagements can address a client’s specific concerns, it is important to work with a CPA advisor who knows their business and the specific industry challenges they face. This paves the way for smooth collaboration that is necessary for a positive outcome.

To learn about the author of this article, Patrick Dunleavey, CPA, CLICK HERE.

Have questions?

If you need assistance or have any questions on the information in this article, please call your CironeFriedberg professional. You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Darien) or email us at info@cironefriedberg.com.