Agreed-Upon Procedures Engagements: CPA Exam Guide
Understand agreed-upon procedures (AUP) engagements for the CPA AUD exam. Covers AT-C Section 215, engagement requirements, practitioner responsibilities, and reporting.
What Are Agreed-Upon Procedures Engagements?
An agreed-upon procedures (AUP) engagement is an attestation engagement in which a practitioner performs specific procedures on subject matter and reports the findings without providing an opinion or conclusion on the subject matter. Under AT-C Section 215, the practitioner performs only the procedures that the engaging party has specified (or that the practitioner developed and the engaging party agreed to) and reports the results. Users of the report draw their own conclusions from the findings.
AUP engagements are distinct from audits and reviews because the practitioner does not express any form of assurance. The value of an AUP engagement lies in the fact that the procedures are performed by an independent practitioner and the findings are reported objectively. Common examples include verifying compliance with specific contractual provisions, testing specific controls at a service organization, and examining royalty calculations under licensing agreements.
Engagement Requirements
Establishing the Terms
The practitioner establishes the engagement terms in writing, including the nature of the engagement, the subject matter, the procedures to be performed, and the intended use of the report. Under the revised AT-C Section 215, which became effective for engagements after July 2022, the use of the report is no longer restricted to specified parties. This is a significant change from prior standards, which required that AUP reports be restricted to the engaging party and specified users who acknowledged the procedures.
Practitioner Requirements
The practitioner must be independent, have adequate knowledge of the subject matter, possess the necessary competence to perform the procedures, and have a reasonable basis for performing the engagement. The practitioner does not need to be independent under SEC or PCAOB independence rules unless the engagement specifically requires it, but the practitioner must be independent under the AICPA Code of Professional Conduct.
Performing the Procedures
Nature of Procedures
The procedures in an AUP engagement are typically specific and objective, such as inspecting specified documents, confirming specific information with third parties, comparing specific items to specified criteria, performing mathematical computations, and making specific inquiries. The practitioner must not perform procedures that are too vague or subjective to produce consistent findings. If the engaging party requests the practitioner to merely read a document and report, this would not constitute an acceptable procedure because it does not produce an objective finding.
Documenting Findings
The practitioner documents the procedures performed and the findings, including any exceptions identified. Findings should be factual and objective, not interpretive. The practitioner does not draw conclusions from the findings or provide recommendations unless the engagement specifically includes advisory services in addition to the AUP engagement.
Reporting
Elements of the AUP Report
The practitioner's report includes a title that includes the word "independent," an identification of the subject matter, a statement that the procedures performed were agreed upon by the engaging party, a listing of the procedures performed and the findings, a statement that the practitioner was not engaged to perform an audit or review and does not express an opinion or conclusion, and a statement that had additional procedures been performed, other matters might have come to the practitioner's attention.
Key Reporting Considerations
The practitioner must not use language in the report that implies assurance, such as "we found no exceptions" without immediately following it with the findings. If the practitioner discovers matters outside the scope of the agreed-upon procedures, the practitioner may include those findings but should clearly distinguish them from the procedures and findings that were agreed upon.
CPA Exam Tips
- AUP engagements provide no assurance. The practitioner reports findings and users draw their own conclusions.
- Under revised AT-C Section 215, AUP reports are no longer restricted to specified parties.
- Procedures must be sufficiently specific and objective. Vague instructions like "review" or "evaluate" are not appropriate AUP procedures.
- The practitioner must be independent under AICPA standards when performing an AUP engagement.
- Know the distinction between AUP engagements, examinations, and reviews, particularly the level of assurance each provides: none, reasonable, and limited, respectively.
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