FAQs About Agreed upon Procedures

An agreed-upon procedures (AUP) engagement uses procedures similar to an audit, but on a smaller and limited scale.

Here’s how a customized AUP engagement differs from an audit and can be used to identify specific problems that require immediate action.

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How Do AUPs Compare to Audits?

The American Institute of Certified Public Accountants (AICPA) regulates both audits and AUP engagements. But the natures of these two types of accounting services are quite different.

When a CPA firm performs an audit, its client is the company. With an AUP engagement, the client is typically the company’s lender or another third party — a fact that usually alleviates potential conflicts of interest.

Another key difference is that of responsibility. Audits require CPAs to provide a formal opinion on whether the company’s financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP).

On the other hand, CPAs make no formal conclusions when performing AUPs; they simply act as finders of fact. It’s the client’s responsibility to draw conclusions based on the CPA’s findings.

AUP engagements may target specific financial data (such as accounts payable, accounts receivable or related party transactions), nonfinancial information (such as a review of internal controls or compliance with royalty agreements), a specific financial statement (such as the income statement or balance sheet) or even a complete set of financial statements.

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When Do You Need AUPs?

AUPs boast several advantages over audits. They can be performed at any time during the year — not just at year-end. And because you have the flexibility to choose only those procedures you feel are necessary, they can be cost-effective.

Lenders may, for example, request an AUP engagement, if they have doubts or questions about a borrower’s financials — or if they want to check on the progress of a distressed company’s turnaround plan.

Or a business owner may decide to hire a CPA to perform an AUP engagement if he or she suspects that the CFO is misrepresenting the company’s financial results or the plant manager is stealing inventory. These engagements can also be useful in mergers and acquisition due diligence.

Who Can Help?

An AUP engagement can be used to dig deeper into financial results and identify specific problems that require immediate action.

SVA's professionals can help you customize an AUP engagement that can identify problems and resolve issues quickly and effectively.