top of page
Image by Constantin Wenning

AGREED UPON AUDIT PROCEDURES

What are Agreed Upon Audit Procedures?

​​​

Agreed-Upon Audit Procedures (AUP) are a type of audit engagement in which an auditor is engaged to perform specific procedures on a subject matter, and the results are reported to the party that requested the work (typically the client or a third party). Unlike traditional audits, where the auditor forms an opinion based on the findings, in an AUP, the auditor only performs the procedures agreed upon by the parties involved and provides a factual report of the findings, without offering an opinion or conclusion.

 

The agreed-upon procedures are generally tailored to meet specific needs of the client or a third party, and the scope is defined in advance by the parties involved. The key difference between an AUP and a full audit is that in an AUP, the auditor doesn’t provide an opinion on the financial statements or other subject matter, but instead just reports factual findings based on the agreed procedures.

Key Benefits of Agreed-Upon Procedures (AUP):
  1. Tailored to Specific Needs:

    • The procedures can be tailored to address specific concerns, making AUP engagements highly customizable. This allows for a more focused review on particular issues or areas of interest, rather than a broad-based audit.

  2. Cost-Effective:

    • Since AUP engagements are typically more narrowly focused than full audits, they tend to be more cost-effective and can be completed in a shorter time frame.

  3. Transparency:

    • The client or third party receives clear factual findings based on pre-agreed procedures, which reduces the potential for ambiguity or subjectivity. The findings are typically verifiable and can be used for fact-based decisions.

  4. No Audit Opinion Required:

    • Because the auditor does not provide an opinion on the subject matter, there is less potential for liability or interpretation issues compared to full audits, which might require more judgment and opinions.

  5. Regulatory Compliance:

    • AUP can be a useful tool for verifying compliance with specific regulations, contracts, or agreements. For example, an AUP can be used to verify whether certain provisions of a loan agreement or regulatory requirement have been met.

  6. Quick Results:

    • Since the scope of procedures is often narrow and the audit does not require an opinion, the turnaround time for AUP engagements can be faster compared to a full audit.

Some Specific Client Need:

​​​​​

"How can I reasonably assess specific business aspects such as operations, business process, financial, reporting & others that are tailored to my specific business requirements?"

Why Choose Us?

We are committed to driving tangible results for your business. With specialized &/or expert knowledge, skills, competence & experience in Auditing, our proven track record and dedication to excellence make us the ideal partner for your business needs & requirements.

​​

Here, we will refer you to our useful actual STAR Scenarios in auditing, allowing us to provide clear, concise examples of our expertise, skills, competence & knowledge in action. It demonstrates our problem-solving abilities, highlights our strategic approach, and emphasizes the tangible outcomes of our work. By focusing on real results, we can effectively show you how we turn challenges into opportunities and drive success for our clients. Whether you're looking for increased profits, improved efficiency, risk management, internal controls & business processes, or innovative solutions, the STAR method helps you understand exactly how we deliver value.  You will see more of these as you continue to browse our services and get to know The CFBS Advantage.​​

STAR SCENARIOS

Following are the links to our various STAR Scenarios for your review in connection herein:

Image by FIN

Internal Auditing

Image by CHUTTERSNAP

Operations Audits

Image by Alexander Grey

Financial Audits

Image by Skye Studios

Business Process Audits

Image by Artist Istanbul

Compliance Audits

Image by Nana Smirnova

Assets & Inventory Audits

Magnifying Glass

Fraud Audits

Key Features of Agreed-Upon Audit Procedures:
  1. Objective:

    • The purpose of an AUP is to carry out specific procedures that are agreed upon by the parties involved and to report factual findings based on those procedures.

    • It is typically used to verify specific facts or to perform targeted procedures based on a specific concern or requirement. For instance, confirming the existence of inventory or checking the accuracy of a certain set of transactions.

  2. Scope:

    • The scope of the audit procedures is strictly defined at the outset and could include any number of tasks, such as:

      • Verifying the accuracy of financial information (e.g., comparing reported figures with supporting documentation).

      • Confirming the existence of assets (e.g., inventory counts, physical assets).

      • Assessing compliance with specific laws or regulations.

      • Testing the functionality of specific internal controls or financial systems.

      • Tracing transactions between certain accounts or across multiple periods.

    • The scope can be very narrow or broad, depending on the needs of the parties involved.

  3. No Opinion:

    • In an AUP, the auditor does not provide an opinion or conclusion on the subject matter. Instead, they simply report the factual findings as a result of the procedures performed.

    • For example, if the procedure is to verify whether a certain payment was made, the auditor will simply state whether the payment was made and provide the details.

  4. Third-Party Reporting:

    • The auditor’s findings are typically reported to a third party or the client, and the results are often shared with stakeholders who are interested in the facts without needing an opinion on the entire financial statements.

    • AUP reports are often used in situations where third-party verification is needed, such as regulatory compliance, contractual requirements, or dispute resolution.

Steps Involved in Agreed-Upon Procedures (AUP):
  1. Agreeing on the Procedures:

    • The first step is to clearly define and agree upon the specific procedures to be performed. This includes determining the exact scope of the work, the timing, and the subject matter to be investigated.

    • The procedures can be wide-ranging, from testing a small set of transactions to more comprehensive reviews like inventory counting or compliance checks.

  2. Planning and Preparation:

    • Once the procedures are agreed upon, the auditor prepares for the engagement by identifying any resources, tools, or documentation needed to carry out the procedures.

    • The planning phase also includes obtaining relevant background information and understanding the context in which the agreed-upon procedures will be performed.

  3. Performing the Procedures:

    • The auditor then carries out the agreed-upon procedures. These may involve:

      • Reviewing and analyzing specific financial records.

      • Confirming balances or transactions with external parties (e.g., confirming customer receivables or bank balances).

      • Inspecting physical assets or conducting inventory counts.

      • Comparing data across different time periods or data sources.

      • Evaluating compliance with specified legal or regulatory requirements.

    • The auditor may also use sampling techniques to select the items on which to perform the procedures.

  4. Reporting Findings:

    • After completing the procedures, the auditor will compile a report that summarizes the findings of the procedures. The report includes:

      • A list of the procedures performed.

      • A factual summary of the results of those procedures.

      • The documents or records reviewed and the findings in relation to the specified objectives.

    • The auditor does not provide an opinion on the subject matter, but instead, reports the facts as observed during the procedures.

    • The report may include some limitations of the procedures if applicable (e.g., if certain data was inaccessible or the scope was restricted).

  5. Providing the Report:

    • The completed AUP report is delivered to the client or the intended third party.

    • The report is typically used for decision-making, compliance verification, investigations, or in situations where factual verification is needed but a full audit opinion is not required.

When Are Agreed-Upon Procedures Typically Used?

  1. Contractual Requirements:

    • AUP is often used in situations where a contract requires the auditor to verify specific financial or operational facts. For example, a contract may require a buyer to verify the seller's financial condition, inventory, or compliance with certain standards.

  2. Litigation or Dispute Resolution:

    • In the case of a dispute, AUPs can be used to gather specific factual evidence (e.g., verifying whether certain payments were made or whether a contract was breached).

    • Lawyers or courts may use AUP findings as part of a legal proceeding.

  3. Regulatory Compliance:

    • Regulatory bodies may require agreed-upon procedures to confirm that a company is adhering to specific regulations (e.g., tax compliance, industry standards, environmental laws).

    • Governments or regulatory bodies may request AUPs to ensure businesses are operating within set parameters.

  4. Investor or Third-Party Reporting:

    • Investors or stakeholders might request agreed-upon procedures to verify specific information before making decisions, such as confirming the value of assets or financial stability before investing.

    • For example, venture capitalists or private equity firms may ask auditors to perform AUP to verify certain performance metrics or projections.

  5. Due Diligence:

    • AUPs can be used during due diligence processes for mergers, acquisitions, or other business transactions to verify specific items (e.g., reviewing historical financial data, inventory counts, or compliance with contractual terms).

  6. Internal Control Testing:

    • Companies may use AUPs to review and verify the functioning of specific internal controls, such as confirming compliance with internal policies, confirming the existence of assets, or testing transaction accuracy.

Limitations of Agreed-Upon Procedures (AUP):
  1. No Audit Opinion:

    • Since the auditor is not required to express an opinion, the results of an AUP may not provide the same level of assurance or comfort as a full audit. The findings are purely factual and may not offer insight into the overall financial health or operational effectiveness of the organization.

  2. Limited Scope:

    • The audit is limited to the procedures agreed upon in advance, so it may not provide a complete picture of the subject matter. For example, if the agreed procedures focus on verifying certain transactions, they may not uncover other potential issues or discrepancies outside of that scope.

  3. Dependency on Client’s Information:

    • The AUP may rely heavily on the accuracy and completeness of the information provided by the client. If the client withholds or provides incomplete data, the auditor may not be able to fully perform the agreed procedures, and the findings may be incomplete or inaccurate.

  4. No Judgment or Interpretation:

    • Because auditors are not asked to provide an opinion, they do not interpret the findings or provide recommendations. This can be a disadvantage if the client seeks expert analysis or guidance beyond factual reporting.

Summary:

Agreed-Upon Audit Procedures (AUP) are a specialized audit engagement where auditors perform specific, pre-agreed procedures and report factual findings based on those procedures. Unlike traditional audits, AUPs do not involve expressing an opinion on the subject matter, making them ideal for situations where only factual verification is required, such as compliance checks, dispute resolution, or verifying contractual requirements. The procedures are tailored to the needs of the client or third party and are often more cost-effective and quicker to complete than full audits. However, since no opinion is given, AUPs offer limited assurance compared to a full audit, and their scope is confined to the agreed-upon tasks.

Audit
Why CFBS?

​

CFBS’ Internal Audits provides an independent, objective assurance and consulting activity designed to continuously add value and improve an organization’s operations. We help organization’s accomplish its objectives by bringing a systematic, disciplined approach to continuously evaluate and improve the effectiveness of risk management, control, and governance processes. Our more than fifteen (15) years of experience, professional service practice & recognized excellence, education & training gained from various industries can give you much leverage & advantages.

Continuously improve & reach your objectives in the midst of the ceaseless & speedy changes in market conditions!
Contact us now for a FREE QUOTATION!

We’ll be glad to hear from you, including about your special or customize requirements.

Why CFBS
bottom of page