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Audit & Assurance
Seeking Feedback on Modernized AUP Standard
by Jasper van den Hout, Principal, International Auditing and Assurance Standards Board | February 13, 2019 |
Agreed-upon procedures (AUP) engagements are widely used in many jurisdictions and the demand continues to grow, particularly in relation to the need for increased accountability around funding and grants. In addition, changes in regulation have also driven increased demand for AUP engagements, especially from smaller entities, as increased audit exemption thresholds in some jurisdictions prompt stakeholders to look for alternative services to an audit.
Extant International Standard on Related Services (ISRS) 4400, Engagements to Perform Agreed-Upon Procedures Regarding Financial Information, was developed over twenty years ago and has not kept pace with the significant changes that have occurred in the business environment driving the demand for AUP engagements on both financial and non-financial subject matters.
In an AUP engagement, the practitioner performs procedures agreed upon by the practitioner and the engaging party and communicates the procedures performed and the related findings in the AUP report.
To explore the issues related to extant ISRS 4400, the IAASB commenced a project in 2015. In November 2016, a Discussion Paper, Exploring the Demand for Agreed-Upon Procedures Engagements and Other Services, and the Implications for the IAASB’s International Standards was issued. The IAASB received responses from a wide range of stakeholders and jurisdictions that indicated support for the views and conclusions expressed in the Discussion Paper. In September 2017, the IAASB approved the project proposal to revise extant ISRS 4400 and in September 2018 the IAASB approved ISRS 4400 (Revised) for exposure.
The Exposure Draft of proposed ISRS 4400 (Revised) uses the clarity drafting convention and enhances key concepts relevant to an AUP engagement, including:
- Professional judgment — new requirement and application material on the role of professional judgment in an AUP engagement;
- Independence — new requirements and application material on disclosures in the AUP report relating to the practitioner’s independence (or lack thereof);
- Engagement acceptance and continuance considerations — new requirements and application material addressing conditions for engagement acceptance and continuance, including guidance on what constitutes appropriate (or inappropriate) terminology to describe procedures and findings in AUP reports;
- Use of a practitioner’s expert — new requirements and application material to address the use of the work of a practitioner’s expert in an AUP engagement, including the practitioner’s responsibilities when using the work of an expert and consideration of whether it is appropriate to include references to the expert in an AUP report; and
- AUP report restrictions — clarification that the AUP report is not restricted to parties that have agreed to the procedures to be performed unless the practitioner decides to do so, and new application material on the practitioner’s considerations if the practitioner wishes to place restrictions on the AUP report.
The Exposure Draft also addresses non-financial subject matters, and includes new definitions and new requirements and application material on written representations, recommendations arising from the performance of AUP engagements, and documentation, among others.
The IAASB is looking for input from all its stakeholders, including funders, regulators and other users of the agreed-upon procedures report, by March 15, 2019 and also invites the sharing of any initial feedback below.
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