On December 19, 2019, the AICPA released SSAE 19, Agreed-Upon Procedures Engagements. This is one of those standards that you'll want to implement early. Why? Greater flexibility.
CPAs will find the new agreed-upon procedures (AUP) standard (SSAE 19) more flexible that the preceding guidance (SSAE 18 AT-C section 215).
How is it more flexible?
And which of these do I like the best? No requirement for assertions.
Additionally, I like the option to develop AUP procedures as the engagement progresses. In the past, the client might review the draft AUP report (at the end of the engagement) and realize it doesn't meet their needs. Sometimes it's better for practitioners to develop procedures as they perform the AUP. SSAE 19 allows you to do just that.
So, if you develop new procedures, what must you do? Prior to issuance of the AUP report, obtain the engaging party's agreement regarding the procedures. Moreover, obtain their acknowledgement that the procedures are appropriate and that they satisfy the intended purpose of the engagement. In effect, the client reviews the procedures, agrees with them, and expresses satisfaction.
SSAE 19 defines an agreed-upon procedures engagement as "an attestation engagement in which a practitioner performs specific procedures on subject matter and reports the findings without providing an opinion or conclusion. The subject matter may be financial or nonfinancial information." The standard goes on to say "Because the needs of engaging party may vary widely, the nature, timing, and extend of the procedures may vary, as well."
Now, let's see what the AUP objectives are.
The objectives of an SSAE 19 engagement include:
Next, let's look at the structure of an AUP report.
The structure of the AUP report should be as follows:
So, the CPA should state what was done and then provide the findings (results). The procedures and findings are placed in the body of the AUP report.
The description of the procedures should be simple and clear.
Here's an example of a good AUP procedure and finding:
Procedure - We obtained the January 2020 check register and the January operating bank account statement. We compared check numbers 2850, 2892, 2933, 2935, 2972 to cleared checks agreeing the payee and the amount.
Findings - No exceptions were noted.
Now, let's look at a poor example:
Procedure - We scanned the company's 2020 bank statements and talked with the CFO. The books seemed to be in order with the exception of July errors.
Finding - Overall, the check disbursements appear to be okay after our general review.
In this poor example, we see general words or statements. What does the word scanned mean? How about seemed to be in order ? Additionally, the finding is vague: okay after our general review.
SSAE 19 provides examples of acceptable and unacceptable wording.
SSAE 19 calls the practitioner to clearly define procedures. Moreover, the standard states that practitioners should not perform procedures that are open to varying interpretations or that are vague.
.A27 of the standard even provides examples of unacceptable AUP terms such as:
.A27 also provides examples of acceptable AUP terms such as:
In addition to proper wording, document your engagement in accordance with SSAE 19.
SSAE 19 calls for the following documentation:
So what about dating the representation letter? The representation letter date should be the date of the AUP report. Additionally, the representation letter should address the subject matter and periods covered by the practitioner's findings.
By now you may be thinking, "Where can I find AUP report examples?"
SSAE 19 provides four illustrative AUP reports in its exhibit (see .A78).
The four example AUP reports relate to:
If you're looking for a template to follow, see example 2. Why? The cash and accounts receivable procedures and findings are excellent. Build procedures and findings like these and you'll be in good shape.
I suggest you download SSAE 19 and keep these reports handy.
So, what about independence? Is that required?
The practitioner has to be independent in order to perform an AUP.
One exception exists when the practitioner "is required by law or regulation to accept an agreed-upon procedures engagement and report on the procedures performed and findings obtained."
The effective date of SSAE 19 is for AUP reports dated on or after July 15, 2021.
Early implementation is permitted.
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Charles Hall is a practicing CPA and Certified Fraud Examiner. For the last thirty years, he has primarily audited governments, nonprofits, and small businesses. He is the author of The Little Book of Local Government Fraud Prevention and Preparation of Financial Statements & Compilation Engagements. He frequently speaks at continuing education events. Charles is the quality control partner for McNair, McLemore, Middlebrooks & Co. where he provides daily audit and accounting assistance to over 65 CPAs. In addition, he consults with other CPA firms, assisting them with auditing and accounting issues.
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