Agreed Upon Procedures

Agreed upon procedures are targeted business investigations that aid decision-making. An agreed-upon procedure engagement starts by gaining an understanding of objectives and scope of the engagement. The team at McNurlin, Hitchcock CPAs appreciates that an agreed upon procedure engagement should be customized to meet a specific goal. At McNurlin, Hitchcock, CPAs, we provide an insight into possible agreed-upon-procedure engagements and why you should engage our CPA firm.

Definition and Overview of Agreed Upon Procedures (AUP)

Agreed Upon Procedures (AUP) refer to a set of activities that define the objectives of an investigation. The client and the auditor agree on the activities and procedures to be performed on specific accounts.
Since the activities and procedures are pre-agreed, the auditor must remain within the definition and scope of the engagement. Moreover, the auditor provides statements of facts about operation procedures and findings only. The auditor does not express an opinion about the financial statements but sticks to specific accounts or operations procedures as defined in the AUP engagement. The client then uses the facts and findings to make conclusions.

Importance and Benefits of Utilizing AUP Services

AUP services are a must-have for businesses that want to detect and discover fraud before a crisis. While internal and external audits may help your business uncover fraud, over 90% of fraudulent activities go undetected.

You may want to blame the CPA performing your external audit or your internal auditors for laxity when you later discover that fraud has been going on in your business undetected. However, we cannot call it negligence but the use of the wrong tools to detect fraud. Using AUP to detect fraud or perform other targeted examinations brings the following benefits to your business.

Customized examinations: When you request AUP services, you are in control of the process. You determine the accounts or procedures to be investigated and the scope of the investigation. The freedom to determine what is to be done allows you and your CPA to customize the investigation to meet specific needs.

Objectivity: AUP allows you to focus on specific areas to achieve your objectives. For instance, if your concern is declining accounts receivables, AUP can help you identify the causes and correct them.

Flexibility: AUP enhances flexibility by allowing you to focus on a specific area at a time.

Enhances compliance and due diligence: Some business procedures are regulated by external bodies that eliminate internal controls. Failure to comply with the regulations can lead to dire consequences. You can use AUP to assess your level of compliance and make necessary changes when you still have time. AUP can also help you perform due diligence investigations and identify areas of weakness.

Purpose and Scope of AUP Engagements

The purpose of an agreed-upon procedures engagement is to seek professional help in investigating specific accounts or subject matters. When you are convinced something is wrong in a specific account, say increasing variances in bank reconciliation statements, or sudden increase in accounts payable, you can request a targeted investigation. The CPA hired to conduct the targeted investigation only works on the assigned areas. This saves time and resources allowing you to get the facts without overstretching your budget. In addition, the CPA does not express opinions or conclusions on your behalf. You only get factual reports to aid your decision-making.

Situations Where AUP Engagements Are Commonly Used

AUP engagements can be used to perform any targeted investigation in a business. However, AUP engagements are most common in:

  • Compliance audits: AUP engagements help you to assess your compliance with different regulations. Your business may also use AUP engagements to comply with standard operating procedures.
  • Mergers and acquisition: Acquiring companies use AUP engagements for due diligence reviews of the target company procedures.
  • Fraud investigation: An AUP engagement can be applied to detect fraudulent activities or cases of negligence.
  • Information Technology Audits: Information technology audits use AUP engagements to evaluate compliance with data integrity policies, system securities, and efficiency.
  • Grant or Funding Compliance: If you run a charitable or not-for-profit organization, AUP engagements help you ensure compliance with donor funds’ terms and conditions.

Advantages of AUP Over Other Assurance Services

AUP engagements have several advantages over other assurance services. Here are some advantages of using AUP.

  • It is a targeted and flexible procedure
  • AUP can be customized to meet specific objectives
  • It enhances the detection of fraud
  • Clients define the scope of the investigation
  • It is cost-effective and quicker than other assurance services

Choosing a CPA Firm for Agreed Upon Procedures

AUP follows similar procedures with other audit engagements. However, agreed upon procedures start with setting engagement objectives. Since you define the objectives before hiring the CPA, you would want to use a consistent approach to finding the right CPA. Typically, you will use the following steps to engage a CPA firm for an AUP:

Define the engagement objectives. State why you want the procedure or what you want investigated.

Engage a CPA firm: Engage a CPA firm that has the expertise to perform the engagement.

Define the scope of the engagement. Once you engage a CPA, the next step is to agree on the scope of engagement.

Performing the procedure. Once planning and scoping are complete, the CPA performs the agreed-upon procedures.

Documentation. The CPA documents facts and findings into a report that is presented to you or your designated officials.

Review and Analysis. The CPA does not express opinions on the findings. That means you have to review and analyze the facts and findings against your objectives.

Decision-making and action. AUP aids decision-making and report implementation. If AUP identified weaknesses, you should correct them.

Benefits of Choosing Our CPA Firm for Agreed Upon Procedures

Our CPA firm appreciates the importance of agreed-upon procedures in your business organization. We understand your desire to identify weaknesses, assess compliance with regulatory bodies, or perform due diligence checks.

As such, we have invested in human resources and technologies to help achieve your objectives. We have experienced and qualified CPA professionals who are always ready to support your business through agreed upon procedures.

Moreover, our CPA professionals are committed to professionalism and integrity, and our track record of successful AUP engagements speaks for itself. Contact us today to learn more.