What is an agreed upon procedures (AUP) engagement?

CUSTOM MADE text on computer screen | What is an agreed upon procedures (AUP) engagement? | Dalby Wendland & Co | CPAs | Business Advisors | ColoradoCPAs can offer many types of helpful audit and assurance services for businesses. An audit, for instance, is a common type of attestation service that provides a formal opinion about whether a company’s financial statements conform to U.S. Generally Accepted Accounting Principles (GAAP).

Consulting services, in contrast, may include advice or technical assistance that’s only for the business’s internal purposes. As such, lenders and other third parties can’t rely on the findings, conclusions, and recommendations presented during a consulting project.

When you need a report that falls somewhere between audits and consulting services, consider an agreed upon procedures (AUP) engagement.

Scope

An AUP engagement uses procedures similar to an audit, but on a limited scale. It can be used to identify specific problems that require immediate action. When performing an AUP engagement, your CPA makes no formal opinion; he or she simply acts as a fact finder. The report lists:

  • The procedures performed, and
  • The CPA’s findings.

It’s the user’s responsibility to draw conclusions based on those 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.

Advantages

AUP engagements have several advantages. They can be performed at any time during the year and they can be relied on by third parties. You also have the flexibility to choose only those procedures you feel are necessary, so AUP engagements can be cost-effective.

Specifically, AUP engagements can be useful in these situations:

  • M&A due diligence,
  • When a business owner suspects an employee of misrepresenting financial results, and
  • To determine compliance with specific regulatory requirements, such as the Health Insurance Portability and Accountability Act (HIPAA) or the Federal Information Security Management Act (FISMA).

In addition, lenders or franchisors may request an AUP engagement if they have doubts or questions about a company’s financials or the effectiveness of its internal controls — or if they want to check on the progress of a distressed company’s turnaround plan.

Contact us

AUP engagements can be performed to supplement audits and consulting engagements — or as a standalone service. We can help you customize an AUP engagement that fits the needs of your business and its stakeholders. Contact our audit team at 970-243-1921 for more information.

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