Using agreed-upon procedures to target specific items of concern

Your CPA offers a wide menu of services. One flexible offering, known as an “agreed-upon procedures” engagement, provides limited assurance on a specific aspect of an organization’s financial or nonfinancial information.

What’s covered?

Agreed-upon procedures can cover various items. For example, a CPA could provide a statement about the reliability of a company’s accounts receivable, the validity of the sales team’s credit card payments, the effectiveness of the controls for the security of a system and even greenhouse gas emissions.

Lenders may request these types of engagements before they’ll approve a new loan application or an extension of credit for an existing customer — or they might want one if a borrower defaults on its loan covenants or payments. These engagements can also be useful in M&A due diligence, by franchisors or when a business owner suspects an employee of misrepresenting financial results.

Stakeholders don’t necessarily like waiting until year end to see how an organization is faring in today’s uncertain markets. Agreed-upon procedures can be done at any time, so they can provide much-needed peace of mind throughout the year.

What’s reported?

These engagements are based on procedures similar to an audit, but on a limited scale. When performing agreed-on procedures, CPAs issue no formal opinions; they simply act as fact finders. The report lists:

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

Agreed-upon procedures can be relied on by third parties. But it’s the user’s responsibility to draw conclusions based on the findings.

What’s new? 

Agreed-upon procedures are usually a one-time engagement, so you might not know much about them — or how the rules that apply to them changed a few years ago. A revised standard was published in 2019, bringing several key changes. Most notably, an accountant is now allowed to report on a subject matter without obtaining a written assertion from the responsible party that the responsible party complies with an underlying criterion, such as laws or regulations. This gives CPAs more flexibility when examining or reviewing certain documents if the engaging party can’t appropriately measure or evaluate them.

The revised standard also:

  • Enables CPAs to develop procedures over the course of the engagement,
  • Allows CPAs to develop or assist in developing the procedures,
  • Removes the requirement for intended users to take responsibility for the sufficiency of the procedures and, instead, requires the engaging party to simply acknowledge the appropriateness of the procedures before the issuance of the practitioner’s report, and
  • Permits the CPA to issue a general-use report.

The new guidance went into effect for reports dated on or after July 15, 2021, although early implementation was permitted.

Contact us

In today’s uncertain marketplace, agreed-upon procedures can provide much-needed peace of mind throughout the year. We can help you customize procedures that fit the needs of your organization and its stakeholders.

© 2022

Information provided on this web site “Site” by Thompson Greenspon is intended for reference only. The information contained herein is designed solely to provide guidance to the user, and is not intended to be a substitute for the user seeking personalized professional advice based on specific factual situations. This Site may contain references to certain laws and regulations which may change over time and should be interpreted only in light of particular circumstances. As such, information on this Site does NOT constitute professional accounting, tax or legal advice and should not be interpreted as such.

Although Thompson Greenspon has made every reasonable effort to ensure that the information provided is accurate, Thompson Greenspon, and its shareholders, managers and staff, make no warranties, expressed or implied, on the information provided on this Site, or about any other website which you may access through this Site. The user accepts the information as is and assumes all responsibility for the use of such information. Thompson Greenspon also does not warrant that this Site, various services provided through this Site, and any information, software or other material downloaded from this Site, will be uninterrupted, error-free, omission-free or free of viruses or other harmful components.

Information contained on this Site is protected by copyright and may not be reproduced in any form without the expressed, written consent of Thompson Greenspon. All rights are reserved.