Tag Archives for " Agreed Upon Procedures "

SSAE 19
Jan 11

SSAE 19: Agreed-Upon Procedures Engagements

By Charles Hall | Auditing

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. 

Greater AUP 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?

  • You no longer request an assertion from the responsible party
  • You can issue general-use reports 
  • Intended users are not required to take responsibility for the sufficiency of the procedures
  • You can develop or assist in developing the procedures over the course of the engagement

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.

Definition of an Agreed-Upon Procedures Engagement

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."

SSAE 19

Now, let's see what the AUP objectives are.

SSAE 19 Objectives

The objectives of an SSAE 19 engagement include:

  • Applying specific procedures to subject matter
  • Issuing a written practitioner's report that describes the procedures applied and the findings

Next, let's look at the structure of an AUP report.

AUP Report Structure

The structure of the AUP report should be as follows:

  • Procedures
  • Findings

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.

Good AUP Procedure and Finding

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:

Poor AUP Procedure and Finding

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.

Acceptable and Unacceptable AUP 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. 

Unacceptable Terms

.A27 of the standard even provides examples of unacceptable AUP terms such as:

  • General review
  • Evaluate
  • Examine

Acceptable Terms

.A27 also provides examples of acceptable AUP terms such as:

  • Inspect
  • Compare
  • Agree
  • Recalculate

In addition to proper wording, document your engagement in accordance with SSAE 19.

AUP Documentation

SSAE 19 calls for the following documentation:

  • Written agreement with the engaging party regarding the appropriateness of the procedures performed for the intended purpose of the engagement
  • The nature, timing, and extent or procedures performed
  • The results of the procedures

You'll also need a written engagement letter (see paragraph .15 of SSAE 19 for an example) and a representation letter (see paragraph .27 of SSAE 19 for an example).

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 Illustrative AUP Report

SSAE 19 provides four illustrative AUP reports in its exhibit (see .A78). 

The four example AUP reports relate to:

  1. Statement of investment performance statistics
  2. Cash and accounts receivable
  3. Claims of creditors
  4. Procedures specified in regulation

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?

Attestation Independence

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."

SSAE 19 Effective Date

The effective date of SSAE 19 is for AUP reports dated on or after July 15, 2021.

Early implementation is permitted.

SSAE 18
May 03

SSAE 18: The Clarified Attestation Standards

By Charles Hall | Auditing

SSAE 18 is effective on May 1, 2017, and changes the Attestation Standards.

Do you issue any attestation reports such as agreed upon procedures? If yes, then be aware of the recent changes from the Auditing Standards Board (ASB). The ASB has clarified the Attestation Standards. The ASB did the same with the audit standards a few years ago; that change resulted in the AU-C (clarity) designations for audit standards.

SSAE 18

Picture from AdobeStock.com

The re-write of the Attestation Standards culminated in the April 2016 issuance of SSAE 18.

SSAE 18 supersedes all Attestation Standards other than:

  • AT section 701, Management’s Discussion and Analysis (MD&A). AT section 701 will not be clarified because practitioners rarely perform attestation engagements to report on MD&A; it will be retained in the attestation standards in its current form. AT section 701 has been renumbered as AT-C section 395.

Also be aware that AT section 501 An Examination of an Entity’s Internal Control Over Financial Reporting That is Integrated With An Audit of Financial Statements was moved to the auditing standards as Statement on Auditing Standards (SAS) No. 130, as An Audit of Internal Control Over Financial Reporting That is Integrated With An Audit of Financial Statements.

Just as the ASB did with the audit clarity standards, a “-C” is added to the clarified Attestation Standards. So the clarified attestation standards are identified as AT-C. The clarified standards are written using ASB’s clarity conventions, including:

  • Objectives for each chapter
  • Definitions in each chapter
  • Separating requirements from application and explanatory material
  • Using various formatting techniques such as bulleted lists to enhance readability
  • When applicable, including additional considerations for governmental entities or smaller less complex entities

Attestation Levels of Service

The clarified standards provide for the following types of attestation services:

ServiceAT-C SectionReport Type
Examination205Opinion
Review210Conclusion
Agreed Upon Procedures215Findings

Sample report excerpts follow:

Examination Report on Subject Matter; Unmodified Opinion

In our opinion, the schedule of investment returns of ABC Company for the year ended December 31, 2020, is presented in accordance with the ABC criteria set forth in Note 1 in all material respects.

Review Report on Subject Matter; Unmodified Conclusion

Based on our review, we are not aware of any material modifications that should be made to the accompanying schedule of investment returns of ABC Company for the year ended December 31, 2020, in order for it to be in accordance with XYZ criteria set forth in Note 1.

Agreed-Upon Procedures Report

We obtained the accounts receivable subsidiary ledger as of June 30, 2017, from Topaz, Inc. We compared all customer account balances in the aged trial balance (exhibit B) as of June 30, 2017, to the balances shown in the accounts receivable subsidiary ledger.

We found no exceptions as a result of the procedure.

New SSAE 18 Requirements

In addition to clarifying (restructuring) the attestation standards, SSAE 18 also:

  • Separates the review engagement procedures and reporting requirements from those of examination engagements (and highlights the similarities of reviews performed under the SSAEs and those performed under Statements on Standards for Accounting and Review Services [SSARS])
  • Requires the practitioner to request a written representation letter in all attestation engagements (the pre-clarity standards only required representation letters for certain engagements)
  • Changes the existing requirements related to scope limitations, indicating that based on the practitioner’s assessment of the effect of the scope limitation, the practitioner should express a qualified opinion, disclaim an opinion, or withdraw from the engagement
  • Eliminated compilations of prospective financial information from the attestation standards (the Accounting and Review Services Committee issued SSARS 23 to cover this service)

Effective Date

The guidance in SSAE No. 18 is effective for practitioners’ reports dated on or after May 1, 2017.

For a full copy of SSAE No. 18, click here.

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