An agreed upon procedures (AUP) engagement uses procedures similar to an audit, but on a smaller and limited scale. Here’s how a customized AUP engagement differs from an audit and can be used to identify specific problems that require immediate action.
How do AUPs compare to audits?
The American Institute of Certified Public Accountants (AICPA) regulates both audits and AUP engagements. But the natures of these two types of accounting services are quite different. When a CPA firm performs an audit, its client is the company. With an AUP engagement, the client can be the company but is typically the company’s lender or another third party — a fact that usually alleviates potential conflicts of interest.
Another key difference is that of responsibility. Audits require CPAs to provide a formal opinion on whether the company’s financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP).
On the other hand, CPAs make no formal conclusions when performing AUPs; they simply act as finders of fact. It’s the client’s responsibility to draw conclusions based on the CPA’s findings.
AUP engagements generally target specific financial data (such as accounts payable, accounts receivable or related party transactions) or nonfinancial information (such as a review of internal controls or compliance with royalty agreements.)
When do you need AUPs?
AUPs can have a few advantages over audits. They can be performed at any time during the year — not just at year end. And because you have the flexibility to choose only those procedures you feel are necessary, they can be cost-effective.
For example, a business owner may decide to hire a CPA to perform an AUP engagement, if he or she suspects that an employee may be stealing inventory or that certain items in the financial statement may be misrepresented. These engagements can also be useful in mergers and acquisition due diligence.
Who can help?
An AUP engagement can be used to dig deeper into financial results and identify specific problems that require immediate action. We can help you customize an AUP engagement that can identify problems and resolve issues quickly and effectively. Contact us at email@example.com.
If you’re interested in working with Tonneson + Co, please reach out to us. We look forward to hearing from you!
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