AUD CPA Exam: Determining the Appropriate Form and Content of an Agreed-Upon Procedures Report for an Attestation Engagement

Introduction

Purpose of the Article

In this article, we’ll cover determining the appropriate form and content of an agreed-upon procedures report for an attestation engagement. Understanding the form and content of an Agreed-Upon Procedures (AUP) report is essential for CPA candidates, especially those preparing for the AUD section of the CPA exam. An AUP report is a specialized document used in specific attestation engagements, and its accuracy and clarity are crucial. This article aims to provide an in-depth understanding of how to determine the appropriate form and content of an AUP report, ensuring that practitioners can effectively communicate their findings while adhering to professional standards.

Agreed-Upon Procedures engagements differ significantly from other attestation engagements, such as audits or reviews. Unlike these engagements, an AUP engagement does not require the practitioner to provide an opinion or assurance on the subject matter. Instead, the practitioner performs procedures that have been agreed upon by the engaging party and other specified users and reports the findings without offering any interpretation or conclusion. This distinction is vital for understanding the purpose and limitations of an AUP report and ensuring that it meets the needs of the specified users.

Definition of Agreed-Upon Procedures (AUP)

What Are AUP Engagements?

An Agreed-Upon Procedures (AUP) engagement is a type of attestation engagement in which a practitioner is engaged to perform specific procedures on a subject matter and report the findings. These procedures are determined by the engaging party and other specified users and are tailored to meet their specific needs. The nature of these procedures can vary widely, depending on the subject matter and the users’ requirements.

In an AUP engagement, the practitioner does not provide an opinion, assurance, or conclusion on the findings. Instead, the report merely presents the results of the procedures performed, allowing the specified users to draw their own conclusions based on the reported findings. This characteristic sets AUP engagements apart from other types of attestation services, such as audits or reviews, where the practitioner provides an opinion on the subject matter.

Common Scenarios Where AUPs Are Used

Agreed-Upon Procedures engagements are commonly used in various scenarios where specified users need precise information but do not require a practitioner’s opinion. Some typical examples include:

• Compliance with Regulatory Requirements: Organizations may engage a practitioner to perform specific procedures to demonstrate compliance with certain regulations. For example, a company might require an AUP engagement to confirm adherence to loan covenants or grant agreements.
• Internal Control Evaluations: A company may request an AUP engagement to assess specific aspects of its internal controls, such as verifying the effectiveness of certain control activities within a business process.
• Financial Information Verification: Investors or lenders might engage a practitioner to verify particular financial information, such as the calculation of financial ratios or the existence and valuation of specific assets.
• Agreed-Upon Procedures for Mergers and Acquisitions: During due diligence for mergers and acquisitions, parties may request an AUP engagement to verify certain financial or operational data provided by the target company.

In these scenarios, the engaging party benefits from the detailed and specific findings reported by the practitioner, without the need for a broad opinion or assurance. Understanding these contexts helps to appreciate the flexibility and utility of AUP engagements in meeting the varied needs of specified users.

Understanding the Nature of Agreed-Upon Procedures

Roles and Responsibilities

Responsibilities of the Practitioner in an AUP Engagement

In an Agreed-Upon Procedures (AUP) engagement, the practitioner’s primary responsibility is to execute the procedures that have been specifically agreed upon by the engaging party and other specified users. The practitioner’s role is to perform these procedures with due professional care and in accordance with relevant professional standards, such as those outlined by the AICPA. It is crucial that the practitioner clearly understands the scope of the engagement and performs the procedures exactly as agreed, without deviation.

The practitioner is also responsible for documenting the work performed and the findings in a clear and accurate manner. This documentation should be sufficiently detailed to allow another practitioner to replicate the procedures and arrive at the same findings. Additionally, the practitioner must maintain independence from the engaging party and specified users to ensure the objectivity and credibility of the findings reported.

The Role of the Engaging Party and Other Specified Users

The engaging party and other specified users play a critical role in defining the scope of the AUP engagement. They are responsible for determining the specific procedures to be performed by the practitioner and ensuring that these procedures are appropriate for their needs. This involves clearly communicating the objectives of the engagement and the information they wish to obtain from the procedures.

It is also the responsibility of the engaging party and specified users to understand the limitations of an AUP engagement. They must recognize that the practitioner will not provide an opinion or assurance on the findings, and the usefulness of the report depends on the clarity and appropriateness of the procedures they have requested. Any misunderstanding or miscommunication regarding the procedures can lead to a report that does not meet the users’ needs, making their role in defining the engagement crucial.

Procedures vs. Opinion

Explanation that the Practitioner Performs Procedures but Does Not Provide an Opinion or Assurance

A key characteristic that distinguishes an AUP engagement from other types of attestation services is that the practitioner does not provide an opinion or assurance on the subject matter. Instead, the practitioner’s role is limited to performing the specific procedures agreed upon and reporting the factual findings resulting from those procedures. This means that the practitioner simply presents the results of the procedures without interpreting or evaluating them.

For example, if the procedure involves verifying the existence of certain assets, the practitioner will report whether or not the assets were observed, but will not provide an opinion on the adequacy or appropriateness of the assets’ existence. This limitation is crucial for users to understand, as it places the responsibility for drawing conclusions and making decisions based on the findings on the specified users, not the practitioner.

Importance of Clear and Precise Procedures to Ensure User Needs Are Met

The effectiveness of an AUP engagement largely depends on the clarity and precision of the procedures agreed upon. Since the practitioner’s role is to perform these procedures and report the findings without interpretation, any ambiguity or lack of specificity in the procedures can lead to a report that fails to meet the users’ needs.

It is essential that the procedures are described in clear, unambiguous terms that leave no room for interpretation. This ensures that the practitioner understands exactly what is expected and can perform the procedures consistently and accurately. Additionally, precise procedures allow the findings to be reported in a manner that is directly useful to the specified users, helping them make informed decisions based on the results.

When drafting procedures, it is important to consider how other practitioners might interpret them. The goal is to create a set of procedures that, when followed by different practitioners, would yield the same findings. This consistency is vital for maintaining the credibility and reliability of the AUP report, ensuring that it serves its intended purpose effectively.

Components of an Agreed-Upon Procedures Report

Title

Appropriate Titling of the Report

The title of an Agreed-Upon Procedures (AUP) report should clearly and accurately reflect the nature of the engagement. The title typically includes the phrase “Independent Accountant’s Report on Agreed-Upon Procedures” to emphasize that the report is prepared by an independent practitioner and is based on procedures agreed upon by the engaging party and other specified users. The title sets the stage for the entire report, providing the reader with an immediate understanding of the document’s purpose and the type of engagement conducted.

Addressee

Identifying the Correct Party to Whom the Report Is Addressed

The AUP report must be addressed to the correct party, typically the engaging party and any other specified users who have agreed to the procedures. The addressee section should clearly list these parties to avoid any confusion about who is entitled to rely on the report. Since the report is not intended for general distribution, it is important to be specific and accurate when identifying the addressees. This section reinforces the limited use of the report and ensures that only those parties who have a vested interest in the engagement receive the findings.

Introduction Paragraph

Purpose of the Engagement

The introduction paragraph of the AUP report should begin by stating the purpose of the engagement. This section briefly describes why the procedures were performed and what the specified parties aim to achieve with the findings. For example, the introduction might state that the procedures were performed to verify compliance with a specific agreement or to confirm the accuracy of certain financial information. Clearly articulating the purpose helps set the context for the reader and ensures that the report’s findings are understood within the appropriate framework.

Identification of the Specified Parties

Along with stating the purpose, the introduction paragraph must also identify the specified parties for whom the procedures were performed. These are the parties that agreed to the procedures and will use the report’s findings. Identifying these parties in the introduction reinforces the limited distribution and usage of the report, ensuring that it is not misinterpreted or misused by unintended recipients.

Procedures and Findings

Detailed Description of the Procedures Performed

The heart of an AUP report lies in the detailed description of the procedures performed. This section must list each procedure in clear, precise language, ensuring that there is no ambiguity about what was done. Each procedure should be described in enough detail so that another practitioner could replicate it exactly as performed. This includes specifying the nature, timing, and extent of the procedures, as well as any criteria or standards applied.

Clear Presentation of the Findings Without Interpretation or Opinion

Following the description of each procedure, the findings must be presented clearly and factually. The practitioner should report what was found during the execution of the procedures without offering any interpretation, analysis, or opinion. For example, if the procedure involved counting inventory, the report should simply state the quantity observed, without commenting on whether that quantity is appropriate or sufficient. The purpose is to present the results in an objective manner, allowing the specified users to draw their own conclusions based on the data provided.

Ensuring Procedures Are Written in a Way That Other Practitioners Could Replicate Them

An essential aspect of an AUP report is ensuring that the procedures are written in such a way that other practitioners could replicate them. This means avoiding vague language or assumptions that could lead to different interpretations. The report should include all relevant details, such as specific items tested, time periods covered, and any standards or benchmarks used. By doing so, the report maintains its reliability and consistency, providing confidence to the specified users that the findings are accurate and replicable.

Statement on Independence

Importance of Stating the Practitioner’s Independence in the Report

Independence is a cornerstone of any attestation engagement, including AUP engagements. The report must include a clear statement that the practitioner is independent of the engaging party and specified users. This statement is crucial for establishing the credibility and objectivity of the report. It assures the users that the findings were not influenced by any conflicts of interest and that the practitioner has adhered to the ethical standards of the profession. Without this assurance of independence, the value of the report could be significantly diminished.

Restrictions on Use

Explanation of Why the Report’s Use Is Restricted to Specified Parties

The AUP report should include a clear statement restricting its use to the specified parties identified in the engagement. This restriction is necessary because the procedures were designed specifically for the needs of those parties, and the findings may not be appropriate or useful for others. The report should explicitly state that it is not intended for use by anyone other than the specified parties and that its distribution should be limited. This restriction helps prevent the report from being taken out of context or misapplied by unintended users.

Signature and Date

Proper Placement and Importance of the Practitioner’s Signature and the Date of the Report

The report should conclude with the signature of the practitioner and the date the report was issued. The signature signifies the practitioner’s responsibility for the report’s content and affirms that the procedures were performed in accordance with the agreed terms. The date is equally important as it indicates when the procedures were completed and the findings were finalized. Together, the signature and date provide the necessary formalities to validate the report, ensuring that it is a credible and official document that can be relied upon by the specified parties.

Key Considerations in Drafting the Report

Clarity and Precision

Importance of Clear and Concise Language

When drafting an Agreed-Upon Procedures (AUP) report, clarity and precision in language are of utmost importance. The report should be written in clear, concise language that is easily understood by the specified users. Ambiguity or overly complex wording can lead to misunderstandings or misinterpretations, which could diminish the report’s effectiveness or lead to incorrect conclusions. Each procedure and finding should be articulated in a straightforward manner, ensuring that the information is accessible and actionable for the intended audience.

Avoiding Ambiguous or Interpretative Statements

In an AUP report, it is critical to avoid ambiguous or interpretative statements. The practitioner’s role is to report factual findings based on the agreed-upon procedures, not to offer opinions or interpretations. Any language that could be construed as subjective or open to multiple interpretations should be carefully avoided. This ensures that the report remains objective and that the findings are presented without bias, allowing the specified users to make their own informed decisions based on the data provided.

Scope and Limitations

Clearly Defining the Scope of the Procedures

The scope of the procedures must be clearly defined in the AUP report. This involves specifying exactly what was covered during the engagement, including the nature, timing, and extent of the procedures performed. Defining the scope helps to set expectations for the specified users, ensuring that they understand what the report includes and, just as importantly, what it does not include. A well-defined scope provides a clear framework for the report, making it easier for users to comprehend the relevance and limitations of the findings.

Noting Any Limitations Encountered During the Engagement

In addition to defining the scope, the AUP report should also note any limitations encountered during the engagement. These could include restrictions on access to information, time constraints, or any other factors that may have affected the procedures or findings. Noting these limitations is essential for providing context to the report, helping the specified users understand any potential gaps or challenges that may have influenced the results. It also ensures transparency, maintaining the integrity and credibility of the report.

Consistency with Engagement Letter

Ensuring the Report Aligns with the Terms Set Out in the Engagement Letter

Consistency between the AUP report and the engagement letter is crucial. The engagement letter outlines the specific procedures that were agreed upon by the practitioner and the specified users, and the report must accurately reflect these terms. Any deviations from the engagement letter, whether in the procedures performed or the way findings are reported, can lead to confusion or disputes about the report’s validity. Therefore, the practitioner must ensure that the report aligns with the agreed-upon terms, providing the specified users with exactly what was promised in the engagement letter.

Legal and Ethical Considerations

Complying with Relevant Standards (e.g., AICPA Standards)

Drafting an AUP report requires strict adherence to relevant professional standards, such as those issued by the AICPA. These standards provide guidelines on how to conduct the engagement, document the procedures, and report the findings. Compliance with these standards is not only a legal requirement but also a professional obligation that ensures the report’s credibility and reliability. Practitioners must be familiar with the applicable standards and ensure that the report is prepared in full compliance with them.

Ethical Obligations Regarding Confidentiality and Independence

In addition to legal standards, practitioners must also adhere to ethical obligations when drafting an AUP report. Confidentiality is a key ethical consideration, as the report may contain sensitive information that should only be disclosed to the specified users. Practitioners must ensure that the report is distributed only to those who are entitled to receive it, and that any confidential information is handled with the utmost care.

Independence is another critical ethical obligation. The practitioner must maintain independence throughout the engagement and clearly state this in the report. Independence ensures that the findings are objective and free from any conflicts of interest, which is essential for maintaining the trust and confidence of the specified users. Ethical compliance in these areas reinforces the professionalism and integrity of the AUP report, ensuring that it meets the highest standards of the accounting profession.

Common Pitfalls and How to Avoid Them

Overstepping Boundaries

Avoiding Providing Opinions or Conclusions

One of the most common pitfalls in Agreed-Upon Procedures (AUP) engagements is the practitioner inadvertently providing opinions or conclusions in the report. The fundamental nature of an AUP engagement is that the practitioner performs specific procedures and reports factual findings without interpretation or judgment. Crossing this boundary can compromise the objectivity of the report and mislead the specified users.

How to Avoid This Pitfall:

• Maintain Objectivity: Always present findings in a factual and neutral manner. Use descriptive language that conveys exactly what was observed or discovered during the procedures without inferring any meaning or making evaluative statements.
• Use Appropriate Language: Avoid phrases that imply assessment or judgment, such as “it appears that,” “we conclude,” or “it is adequate.” Instead, use straightforward language like “we observed,” “the documentation showed,” or “the calculation resulted in.”
• Refer Back to Procedures: Ensure that each finding directly corresponds to the procedure performed. This linkage helps maintain focus on reporting what was done and what was found, without extending into analysis or opinion.
• Peer Review: Have another qualified practitioner review the report to identify and remove any language that may inadvertently suggest an opinion or conclusion.
• Understand Professional Standards: Familiarize yourself with the relevant professional standards and guidelines, such as those provided by the AICPA, which outline the appropriate content and language for AUP reports.

Example of Appropriate Reporting:

Procedure: We compared the accounts receivable balances as of December 31, 2023, to the subsequent cash receipts through January 31, 2024.

Finding: We noted that $500,000 of the $750,000 in accounts receivable as of December 31, 2023, was collected by January 31, 2024.

Example of Inappropriate Reporting:

Finding: The company’s accounts receivable collection practices are effective, as a significant portion was collected promptly.

Explanation: This statement provides an evaluative conclusion about the effectiveness of the company’s practices, which is beyond the scope of reporting factual findings.

Inadequate Documentation

Importance of Thoroughly Documenting the Procedures and Findings

Proper documentation is a critical component of any AUP engagement. Inadequate documentation can lead to misunderstandings, questions about the engagement’s integrity, and challenges during peer reviews or regulatory inspections. Thorough documentation ensures that the procedures performed and the findings obtained are transparent, replicable, and verifiable.

Consequences of Inadequate Documentation:

• Lack of Clarity: Insufficient documentation can make it difficult for specified users to understand what was done and what was found, reducing the usefulness of the report.
• Challenges in Replicability: Other practitioners may not be able to replicate the procedures or verify the findings, undermining the reliability of the report.
• Professional Liability: Poor documentation can expose the practitioner to legal and professional risks if the engagement is called into question.
• Non-Compliance with Standards: Failing to document adequately may result in non-compliance with professional standards, leading to disciplinary actions or reputational damage.

How to Avoid This Pitfall:

• Detailed Workpapers: Maintain comprehensive workpapers that record every step of the procedures performed, including the methodologies used, data sources, and any calculations or analyses conducted.
• Clear and Organized Format: Organize documentation logically and systematically, making it easy to follow and understand. Use headings, subheadings, tables, and appendices as needed to structure the information effectively.
• Include Supporting Evidence: Attach or reference all relevant supporting documents, such as invoices, contracts, confirmations, and correspondence, that substantiate the findings reported.
• Document Deviations: Record and explain any deviations from the planned procedures, including the reasons for changes and their impact on the findings.
• Timely Documentation: Prepare documentation contemporaneously with performing the procedures to ensure accuracy and completeness.
• Quality Control Reviews: Conduct internal reviews of the documentation to verify that it meets all professional and regulatory requirements before finalizing the report.

Best Practices for Effective Documentation:

• Use Standardized Templates: Employ standardized documentation templates that align with professional standards to ensure consistency and completeness across engagements.
• Be Concise Yet Comprehensive: Provide enough detail to convey all necessary information without unnecessary verbosity that can obscure key points.
• Ensure Accuracy: Double-check all documented information for accuracy, including numerical data, dates, and descriptions.
• Maintain Confidentiality: Protect sensitive information within the documentation by following appropriate confidentiality and data security protocols.

Example of Thorough Documentation:

Procedure: We inspected 25 randomly selected purchase orders from July 2023 to verify authorization signatures.

Documentation Details:

• Methodology: Used a random number generator to select 25 purchase order numbers from the July 2023 purchase ledger.
• Findings: All 25 purchase orders inspected contained authorized signatures from the designated approving managers as per the company’s authorization matrix dated January 1, 2023.
• Supporting Evidence: Copies of the inspected purchase orders are included in Appendix A.

Misunderstanding the Intended Use

Ensuring the Specified Parties Understand the Nature and Limitations of the AUP Report

A common pitfall in AUP engagements is the specified parties misunderstanding the purpose, scope, and limitations of the AUP report. Such misunderstandings can lead to inappropriate reliance on the report for purposes it was not intended to serve, resulting in flawed decision-making and potential disputes.

Potential Issues from Misunderstanding:

• Overreliance on Findings: Specified users may incorrectly assume that the report provides assurance or an opinion, leading them to place undue reliance on the findings.
• Misapplication of Findings: The findings may be used for unintended purposes, increasing the risk of misinterpretation and inappropriate conclusions.
• Legal and Professional Risks: Misunderstandings can expose the practitioner to legal liability and damage professional relationships if users feel misled by the report’s content or scope.

How to Avoid This Pitfall:

• Clear Communication During Engagement Planning:
  • Engage in thorough discussions with the specified parties during the planning phase to clarify the nature, purpose, and limitations of the AUP engagement.
  • Ensure all parties understand that the practitioner will not provide an opinion or assurance and that the findings are limited to the procedures performed.
• Detailed Engagement Letter:
  • Draft a comprehensive engagement letter that explicitly outlines the scope of work, the procedures to be performed, and the limitations of the engagement.
  • Include statements that clarify the practitioner’s role, the nature of the findings, and how the report should and should not be used.
  • Obtain written acknowledgment from the specified parties that they understand and agree to the terms outlined in the engagement letter.
• Explicit Statements in the Report:
  • Include clear language in the report reiterating its purpose and limitations, specifying that no opinion or assurance is provided.
  • State that the report is intended solely for the specified parties and describe any restrictions on distribution and use.
• Provide Context and Explanations:
  • Where appropriate, include explanations within the report that provide context for the findings and remind users of the procedures’ scope and limitations.
• Offer to Discuss Findings:
  • Extend an invitation to the specified parties to discuss the report and address any questions or clarifications needed to ensure proper understanding and use of the findings.
• Educational Materials:
  • Provide or recommend educational resources that help specified parties better understand AUP engagements and the appropriate application of the report’s findings.

Example of Clarifying Statements in the Report:

“This report is intended solely for the information and use of [Specified Parties] and is not intended to be, and should not be, used by anyone other than these specified parties. Our procedures were performed solely to assist [Specified Parties] in evaluating [Subject Matter], and we do not express an opinion or provide any assurance on the information presented.”

Benefits of Ensuring Proper Understanding:

• Appropriate Use of Findings: Specified parties will use the report’s findings correctly, making informed decisions based on an accurate understanding of the information provided.
• Reduced Risk of Misinterpretation: Clear understanding minimizes the risk of misinterpretation and the potential negative consequences that can arise from it.
• Enhanced Professional Relationships: Effective communication and clarity foster trust and confidence between the practitioner and the specified parties.
• Compliance with Professional Standards: Ensuring that specified parties understand the engagement aligns with professional standards and ethical obligations, protecting both the practitioner and the users.

By being aware of these common pitfalls and actively taking steps to avoid them, practitioners can enhance the quality and reliability of their Agreed-Upon Procedures reports. This diligence ensures that the reports effectively serve their intended purpose and uphold the high standards expected in the accounting profession.

Example of an Agreed-Upon Procedures Report

Sample Report Layout

Below is a sample layout of an Agreed-Upon Procedures (AUP) report, with annotations explaining each section to provide a clear understanding of the report’s structure and content.

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Independent Accountant’s Report on Agreed-Upon Procedures

[Practitioner’s Firm Name]

[Date]

To [Specified Parties]:

Introduction Paragraph:

We have performed the procedures enumerated below, which were agreed to by [Engaging Party] and [Other Specified Users], solely to assist you in evaluating [Subject Matter]. [Subject Matter] is the responsibility of [Engaging Party]. The sufficiency of these procedures is solely the responsibility of the specified parties. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose.

Annotation: The introduction clearly states the purpose of the engagement, identifies the specified parties, and includes a disclaimer about the sufficiency of the procedures, ensuring users understand the limitations.

Procedures and Findings:

1. Procedure 1: We inspected [X number] of [documents, records, etc.] from [Date Range] to verify [specific criteria, e.g., authorization signatures, compliance with policy, etc.]. Finding 1: We noted that [X number] of the [Y number] documents inspected were [in compliance/not in compliance, etc.].
2. Procedure 2: We recalculated [specific financial ratios, balances, etc.] based on the data provided by [Engaging Party] as of [Date]. Finding 2: The recalculated amounts agreed with the amounts reported, with no exceptions noted.

Annotation: Each procedure is described in detail, followed by the corresponding factual findings. The language is clear, concise, and avoids any interpretation or opinion, strictly adhering to the facts observed during the engagement.

Statement on Independence:

We are independent of [Engaging Party] in accordance with the relevant ethical requirements relating to our audit engagements.

Annotation: The report includes a statement affirming the practitioner’s independence, which is crucial for maintaining the credibility and objectivity of the findings.

Restrictions on Use:

This report is intended solely for the information and use of [Specified Parties] and is not intended to be, and should not be, used by anyone other than these specified parties.

Annotation: A clear restriction on the use of the report ensures that the findings are not misinterpreted or misapplied by unintended users.

Practitioner’s Signature

[Practitioner’s Name]

[Practitioner’s Title]

[Date]

Annotation: The practitioner’s signature and the date of the report validate the document and indicate the completion of the procedures.

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Analysis of the Sample

The sample AUP report above exemplifies the key aspects that make the report compliant with professional standards and effective in communicating the findings to the specified users. Below are the critical elements that contribute to its compliance and clarity:

1. Clear Title: The title, “Independent Accountant’s Report on Agreed-Upon Procedures,” accurately reflects the nature of the engagement and emphasizes the practitioner’s independence.
2. Specific Addressee: The report is addressed to the specified parties, ensuring that the intended users are clearly identified, which aligns with the report’s restricted use.
3. Purpose and Scope Clarification: The introduction paragraph effectively communicates the purpose of the engagement, the role of the specified parties in determining the sufficiency of the procedures, and the responsibility of the engaging party for the subject matter.
4. Detailed Procedures and Findings: The procedures and findings are presented in a manner that is both comprehensive and precise. Each procedure is described in a way that another practitioner could replicate it, and the findings are reported factually without interpretation or opinion.
5. Independence Statement: The inclusion of an independence statement reassures the users that the findings are objective and free from any conflicts of interest, which is a fundamental requirement for any attestation engagement.
6. Use Restrictions: The report includes a clear statement restricting its use to the specified parties. This restriction is crucial for preventing the misuse or misinterpretation of the findings by parties for whom the report was not intended.
7. Signature and Date: The practitioner’s signature and the date of the report serve as formal validation, indicating that the report is complete and that the procedures were performed as described.

Key Takeaways:

• Adherence to Standards: The sample report strictly adheres to professional standards, including those issued by the AICPA, ensuring that the report is both legally compliant and professionally credible.
• Clarity and Objectivity: The report is clear, objective, and free from any subjective interpretations, ensuring that the findings are presented in a neutral and factual manner.
• Proper Structure: The structured format, with distinct sections for procedures, findings, and other required statements, makes the report easy to navigate and understand, which is essential for effective communication with the specified users.

By following the layout and content guidelines demonstrated in this sample, practitioners can ensure that their AUP reports are both compliant with professional standards and effective in meeting the needs of the specified users.

Conclusion

Recap of Key Points

In this article, we explored the critical components and considerations involved in drafting an Agreed-Upon Procedures (AUP) report. We began by understanding the unique nature of AUP engagements, where the practitioner performs specified procedures without providing an opinion or assurance. We then examined the essential elements of an AUP report, including the title, addressee, introduction, procedures and findings, independence statement, restrictions on use, and the practitioner’s signature and date.

Key takeaways include:

• Clear and Objective Reporting: An AUP report must clearly describe the procedures performed and report the findings factually, without offering any interpretation or opinion.
• Defined Scope and Limitations: The scope of the engagement and any limitations should be explicitly stated to avoid misunderstandings by the specified users.
• Consistency with the Engagement Letter: The report must align with the terms outlined in the engagement letter, ensuring that the procedures performed and findings reported meet the expectations of the specified users.
• Compliance with Standards: Practitioners must adhere to relevant professional standards, such as those issued by the AICPA, to ensure the report’s credibility and reliability.
• Proper Use and Distribution: The report should include clear restrictions on its use, limiting it to the specified parties to prevent misinterpretation or misuse.

Final Tips for CPA Exam Candidates

For CPA exam candidates preparing for the AUD section, understanding AUP reports is crucial. Here are some final tips to help you approach questions related to AUP reports on the exam:

• Focus on the Nature of AUP Engagements: Remember that AUP engagements are distinct from audits and reviews because they do not provide an opinion or assurance. Be prepared to identify this key difference in exam scenarios.
• Understand the Structure of AUP Reports: Familiarize yourself with the standard format of an AUP report, including the purpose of each section. This knowledge will help you answer questions related to the content and structure of these reports.
• Practice Identifying Procedures and Findings: Be comfortable with recognizing and differentiating between procedures and findings in practice questions. Understand how to report factual findings without crossing into the territory of providing conclusions or opinions.
• Know the Professional Standards: Review the AICPA standards related to AUP engagements, as these are often tested in the exam. Understanding these standards will help you answer questions about compliance and ethical considerations.
• Be Prepared for Scenario-Based Questions: The AUD exam often includes scenario-based questions that require you to apply your knowledge to real-world situations. Practice interpreting and drafting portions of an AUP report based on given scenarios to strengthen your skills.

By mastering these key areas, you will be well-prepared to tackle questions related to Agreed-Upon Procedures reports on the AUD section of the CPA exam.