Agreed Upon Procedures

Overview

Agreed-upon procedures engagement is a type of engagement which auditor performs certain procedures that are agreed upon in advance. In this engagement, the auditor and specified parties agree that the auditor will perform specific procedures and report the findings. Likewise, there are usually three parties involved in the engagement, including the auditor, the client, and another third party.

Unlike an audit, auditors do not give an opinion on subject matters in the agreed-upon procedures. Auditors only report of findings based on the agreed procedures performed on the subject matter. Hence, the clients need to make their own conclusion on the subject matter.

In the agreed-upon procedures, auditors do not perform an examination or a review like in an audit or a review engagement. Hence, the reporting should be in the form of procedures and findings. For example, the report of agreed-upon procedures may state “we found no exceptions as a result of the procedures” or “we found no difference as a result of the procedures”, etc. But it should never state “in our opinion…” or “nothing has come to our attention…”.

Also, the use of the report in the agreed-upon procedures is strictly for the specified parties. It is not for the public or any related stakeholders that are not the specified parties of the agreement.

Agreed Upon Procedures vs Audit

It may be easier to understand when we look at the comparison between agreed-upon procedures and audit below:

Agreed Upon Procedures vs Audit
Agreed Upon Procedures	Audit Engagement
The assurance provided varies based on the nature and scope of the agreed procedures	The assurance provided is in form of the positive assurance
Auditors perform the work based on the procedures agreed upon by auditors and specified parties, e.g. the client and other third party.	Auditors perform the work based on acceptable auditing standards.
Auditors do not make conclusion on the subject matter	Auditors need to obtain sufficient appropriate evidence to make conclusion on the subject matter
The level of risk varies based on the agreed procedures	The risk is reduced to an acceptably low level
Auditors do not give an opinion on subject matter in the report	Auditors need to give an opinion on subject matter, e.g. financial statements, in the audit report
Usually state in the report as “We found no exceptions…”	Usually state in the report as “In our opinion…”