CPA Auditing and Attestation (AUD) › Types of Engagements - Agreed Upon Procedures
Agreed-upon procedures can be performed as long as the following conditions are present:
Practitioner independence
Party agreement
Sufficient procedures
All of the answer choices are correct
All of these factors must be present for an agreed-upon procedure engagement to be conducted.
Accepting an engagement to examine an entity's financial projection most likely would be appropriate if the projection were to be distributed to:
All shareholders of record as of the report date
A bank with which the entity is negotiating for a loan
Potential shareholders who request a prospectus or a registration statement
All employees who work for the entity
Financial projections are hypothetical prospective financial statements. Because the user may need to ask the responsible party questions about the underlying assumptions, financial projections are restricted use reports, whose use is restricted to the responsible party and those third parties with whom the responsible party is negotiating directly.
The agreed-upon procedure report should:
Indicate the auditor is independent
Include an appropriate address
Include the identification of the engaging party
All of the answer choices are correct
All of the elements are included in the terms of the engagement. The engagement must express auditor independence, identify and address and include the identification of the engaging party.
Procedures performed under an attestation engagement
Comply with GAAP
Comply with SEC Regulations
Comply with government regulations
Meet the intended purpose of the engagement
In order to comply with terms of engagement under an attestation, the engagement should meet the intended purpose of the engagement.
Anderson CPA’s entered into an Agreed upon Procedure engagement with Delany Inc. Management of Delany discussed the terms of the engagement with auditors but refused to put the terms in writing. Anderson should:
Perform the terms as to their oral agreement
Do not perform the agreed-upon terms unless they secure payment
Withdraw from the engagement
Alert regulatory authorities of the departure
SSAE 18 requires that the terms of the engagement be in writing. Because management is refusing to express the terms in writing the firm should not accept the engagement and withdraw.
An accountant may accept an engagement to apply agreed-upon procedures to prospective financial statements provided that:
The prospective financial statements are also examined
Negative assurance is expressed on the prospective financial statements taken as a whole
Use of the report is restricted to the specified parties
Responsibility for the adequacy of the procedures performed is taken by the accountant
An accountant may accept an engagement to apply agreed-upon procedures to prospective financial statements provided that certain conditions are met, including that the use of the report is restricted to the specified parties.