This is a quick tutorial on how to carry out an efficient Agreed-Upon Procedures engagement.
We have covered the background and theory in another article. However, this is about efficiently completing an agreed-upon procedure (AUP) using our updated ISRS 4400 template.
Step 1: Start the Preliminary engagement activities on page A1:
- Before accepting or continuing an agreed-upon procedures engagement, we must understand the purpose of the engagement.
- There is a space to describe the engagement in general terms.
- Make a concise summary for insertion into the engagement letter and final report as to the nature and purpose of the engagement.
- Then there is a field to describe the subject matter e.g. "Use of Grant Funding" or "Asset Procurement".
Step 2: Complete the Engagement Acceptance and Continuance Checklist (A2) to ensure that you can accept or continue the engagement:
- If we are aware of any facts or circumstances indicating that the procedures we are being asked to perform are inappropriate for the agreed-upon procedures engagement we may suggest other services, such as an assurance engagement, that may be more appropriate.
- Any issues arising from this precondition checklist should be recorded as comments for follow up or as a request to the client if something requires clarification.
Step 3: Complete the Engagement Level Quality Control checklist (A3):
- This is about the engagement partner understanding their responsibilities and documenting this.
Step 4: Create a sub-page for each procedure to be carried out to test the subject matter (E1):
- This is a page that respawns for each procedure, so there will be as many versions of this as there are separate procedures.
- As the page is created add a quick version of the procedure, e.g. Procedure: Select expenditure over $25k.
- There is a space on the page to enter the full specific procedure - this is carried through to the final report (and the engagement letter if not yet created).
- Don't carry out the work on the E1 pages yet - we will come back here later.
Step 5: Add staff details, partner, other staff assigned to the job:
- If we are using the work on an expert that should go here.
Step 6: Add details concerning client communication:
- If you have not already done so, create an engagement letter (page A5).
- This includes fields already completed (such as the procedures from E1 pages) and paragraphs toggled on or off depending on prior answers.
- Standard paragraphs are included in the AA supplied engagement letters that cover the requirements for an AUP engagement.
- A detailed checklist of requirements in the letter is optional.
Step 7: Obtain information from the client relevant to the AUP engagement:
- As part of the early information gathering from the client, request information necessary to perform the AUP engagement.
- If trial balance data will be helpful to carry through to testing pages, add this now.
Step 8: Go back to the E1 - Procedures pages:
- If trial balance data is entered, this may be added into the top section using the drop-down.
- Enter work performed making sure this is just what the procedure specified. This is not an audit.
- If required use the G to V work papers for further testing if the procedures require sampling, confirmations, or other specific procedures.
- The items to be tested may be loaded from a spreadsheet or manually added, depending on what is easiest.
- Procedures may be manually added as tests, then the testing page is opened and completed.
- If the procedures involve sampling, our tool can be used for CMA or random samples (simple filtering or selecting transactions over a certain amount as in the video above may be done in Excel prior to import).
- Cross-references these other pages back to the E procedures pages.
- The points at 2.2 and 2.3 will be carried over into the final report so make sure these are clear and concise.
Step 9: There is a question regarding any non-compliance with law or regulation, then we finalise and report:
- If any errors are found, we must include them in the factual findings section of the procedures page.
- Use the Key Issues to bring them to partner attention, or if they are monetary errors we can raise a journal adjustment and print a report from page W1.
- Note that we are not requesting the client to adjust the errors found, merely reporting their existence.
- The partner completes the Z1- AUP Summary Information. Z1 ensures that the partner is satisfied with all key issues and items in AUP engagement and that they have completed all engagement procedures agreed in the engagement letter.
- Finally, the report is completed per Z2. If all items have been properly addressed the correct information should all be included and the correct sections selected.
- There are some final questions to ensure that all necessary points have been considered.