Agreed-upon procedures (ISRS 4400) - Procedures and factual ...

Learning Outcomes

After reading this article, you will be able to explain what an agreed-upon procedures (AUP) engagement involves under ISRS 4400, describe the roles of all parties, identify what constitutes factual findings, and distinguish AUP from assurance engagements. You will also understand typical procedures, the structure and wording of AUP reports, and the professional and ethical responsibilities associated with these engagements.

ACCA Audit and Assurance (AA) Syllabus

For ACCA Audit and Assurance (AA), you are required to understand the nature, scope, and practicalities of agreed-upon procedures engagements—particularly how they differ from assurance engagements. Focus your revision on:

• The purpose and definition of agreed-upon procedures engagements under ISRS 4400.
• The typical structure, roles, and required documentation of an AUP engagement, including procedures, factual findings, and reporting.
• The differences between agreed-upon procedures and assurance engagements.
• The nature of factual findings versus opinions or conclusions.
• Professional and ethical obligations for practitioners performing AUP assignments.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Which of the following does an agreed-upon procedures report provide?
   1. A reasonable assurance opinion
   2. A factual summary of the results of specific procedures
   3. Positive assurance on the subject matter
   4. Negative assurance on the subject matter

2. What is the main distinction between an agreed-upon procedures engagement and a limited assurance engagement?

3. Who determines the specific procedures to be performed in an AUP engagement?

4. True or false? In an AUP engagement, the practitioner may provide recommendations to improve the client’s internal controls.

Introduction

Agreed-upon procedures (AUP) engagements are assignments in which an independent practitioner performs procedures that have been specifically requested by the engaging parties and reports only factual findings, without providing any assurance or opinion.

Key Term: agreed-upon procedures (AUP) engagement
An engagement where a practitioner performs specific procedures agreed with the engaging parties and reports factual findings, with no assurance provided.

Unlike assurance engagements, AUP assignments do not involve expressing a conclusion or opinion. Users must draw their own conclusions based on the factual results reported by the practitioner.

Structure and Scope of Agreed-upon Procedures Engagements

Purpose and Key Characteristics

AUP engagements are typically requested when users require specific information about a particular matter—such as confirmation of balances, verification of selected transactions, or compliance with contract terms—but do not need or want assurance.

• The engaging parties (often management, regulators, or third parties) specify the exact procedures before work begins.
• The practitioner performs only those procedures, with no professional judgement on appropriateness or sufficiency.
• The report is not for general use—findings must be interpreted by the intended users.

Key Term: factual findings
Statements made by the practitioner describing the objective results of the specific procedures performed, without interpretation or professional evaluation.

Key Term: practitioner
The auditor or accountant conducting the engagement, who performs the agreed procedures and reports the results without providing assurance.

The Roles of the Parties

Every AUP engagement involves at least three parties:

• Practitioner: Performs the work and issues the report.
• Engaging party: Requests the procedures and defines their scope (often management or those charged with governance).
• Intended users: Rely on the reported factual findings to make decisions.

Key Term: engaging party
The individual or organization requesting the AUP engagement and specifying the procedures to be performed.

Key Term: intended users
Persons or groups identified as being able to use the AUP report for their decision-making.

The responsible party is usually the same as the engaging party. The procedures must be clear, objective, and capable of being performed by any competent practitioner.

Elements of Agreed-upon Procedures Engagements

Key stages in an AUP engagement include:

1. Agreeing the Procedures The engaging party and practitioner agree in detail which procedures to perform. These are often:

   • Inspection of documents or records
   • Recalculation of figures
   • Observation of specific processes
   • Confirmation of balances with third parties

2. Documenting the Engagement Terms An engagement letter sets out the nature, scope, and limitations of the work, procedures requested, responsibilities of the parties, and distribution of the report.

3. Performing the Procedures The practitioner strictly follows the agreed work—no more, no less. No interpretation, analysis, or extension is permitted.

4. Reporting Factual Findings The report objectively describes the results from each procedure, without drawing conclusions or providing recommendations.

Worked Example 1.1

Scenario: ABC Ltd asks their accountant to check whether five payments to major suppliers match the amounts on original invoices.

Question: What must the report include?

Answer:
The report should describe each procedure (e.g., "Compared amount paid to supplier invoice for invoice no. 9823") and state the result factually (e.g., "The amount paid (£5,000) agreed with the invoice amount."). The report must not state an opinion or comment on the adequacy of ABC Ltd's payment procedures.

Distinguishing AUP from Assurance Engagements

AUP engagements differ significantly from both audits (reasonable assurance) and reviews (limited assurance):

Key Term: assurance
A conclusion by a practitioner designed to increase the confidence of intended users about the subject matter.

In AUP assignments, no assurance—positive or negative—is ever given.

Exam Warning

A common error is to describe the AUP report as containing “limited” or “reasonable” assurance, or as providing an opinion or conclusion. This is incorrect: the report contains only factual results and states that no assurance is provided.

Procedures Commonly Performed in AUP Engagements

The procedures can be highly varied, but all must be:

• Able to be described clearly and objectively;
• Capable of being repeated by another practitioner with the same result; and
• Directed at matters relevant to the users’ needs.

Common examples include:

• Checking whether amounts on bank statements agree to accounting records;
• Recalculating payroll totals for accuracy;
• Inspecting selected contracts to verify terms;
• Observing a physical inventory count and listing discrepancies;
• Agreeing stated figures to external confirmations.

Worked Example 1.2

Scenario: A charity’s board wants assurance that grant income has been recorded correctly. They ask the practitioner to compare grant receipts in June and July to remittance advices and the bank statement.

Question: How should results be reported?

Answer:
The report should state, for example, “For June and July 20X5, grant income per the receipts matched the amounts credited in the bank statement and the remittance advices, except that one remittance for £2,000 did not appear in the bank statement as at 31 July 20X5.” No interpretation or opinion is included.

Structure and Content of the Report

The report must:

• Identify the engaging party, procedures performed, and any specific limitations;
• State that the procedures were agreed with the party(ies);
• List the factual findings for each procedure in a clear, neutral way;
• Include a disclaimer stating that no assurance is provided, and users must draw their own conclusions.

Key Term: disclaimer of assurance
A specific statement confirming that no assurance is expressed, and that the report should not be used as assurance over the subject matter.

Distribution and Use of AUP Reports

Reports from AUP engagements are usually restricted to the parties who requested the work, as the procedures are tailored to their needs and may not be suitable for others.

The engagement letter and the report should state any distribution restrictions.

Practitioner’s Professional and Ethical Responsibilities

While the practitioner does not provide assurance or an opinion in AUP engagements, the following professional requirements still apply:

• Independence may be required or desirable to ensure credibility.
• The practitioner must comply with relevant ethical standards (e.g., integrity, objectivity, confidentiality, and professional behaviour).
• If, during the engagement, they become aware of matters such as fraud or non-compliance with laws and regulations, appropriate action must be taken in line with the code of ethics.

Revision Tip

Always use precise, neutral language when describing findings. Never state a judgement, recommendation, or opinion in an AUP report.

Summary

Agreed-upon procedures engagements under ISRS 4400 have a defined scope, with the practitioner performing only those procedures requested and reporting factual findings. No assurance is provided to users, and the report contains a disclaimer to this effect. The engaging party is responsible for both the procedures to be performed and the interpretation of results. Independence and ethical principles still apply.

Key Point Checklist

This article has covered the following key knowledge points:

• Understand the structure and purpose of agreed-upon procedures (ISRS 4400) engagements.
• Identify the roles of practitioner, engaging party, and intended users.
• List examples of procedures suitable for AUP work.
• Distinguish factual findings from an assurance opinion or conclusion.
• Describe the content and wording required in an AUP report, including distribution restrictions.
• Recognize the professional and ethical duties when performing an AUP engagement.

Key Terms and Concepts

• agreed-upon procedures (AUP) engagement
• factual findings
• practitioner
• engaging party
• intended users
• assurance
• disclaimer of assurance