Agreed upon procedures CPA exam Auditing course


Define agreed-upon procedures engagements.

When the auditor and management or a third-party user agree that the engagement will be limited to certain specific procedures, it is referred to as an agreed-upon procedures engagement. Many CPAs refer to these as procedures and findings engagements because the resulting reports emphasize the specific procedures performed and the findings of those completed procedures.

Agreed-upon procedures engagements appeal to CPAs because management, or a third-party user, specifies the procedures they want done and then the CPA issues a report describing the procedures agreed upon and the findings resulting from the procedures. Imagine the difficulty a CPA firm faces if it is asked to issue an opinion to a federal agency that a company complied with federal affirmative action laws for a two-year period under compliance attestation standards. Now assume that the federal agency is willing to identify 10 specific procedures the CPA firm will do to satisfy the agency. Obviously, the latter engagement will be much easier to manage. Assuming the CPA firm and federal agency can agree on the procedures, many CPA firms are willing to perform the procedures and issue a report of the related findings. Other agreed-upon procedures engagements might involve a CPA calculating internal rates of return and beta risk for measuring volatility for a mutual fund or gross sales amounts used to compute rent under a store lease for a retail firm.