The International Auditing and Assurance Standards Board (IAASB) today released International Standard on Related Services (ISRS) 4400 (Revised), its revised standard for performing agreed-upon procedures engagements.

In an agreed-upon procedures engagement, the practitioner performs the procedures that have been agreed upon by the practitioner and the engaging party, and the practitioner communicates those procedures and the related findings in the agreed-upon procedures report. A wide range of stakeholders use agreed-upon procedures reports for a variety of reasons; for example, regulators, funding bodies, creditors and others ask for agreed-upon procedures reports to support or complement information, such as audited financial statements or loan or grant applications.

“Agreed-upon procedures engagements are widely used in many jurisdictions and the demand for such engagements continues to grow, particularly in relation to the need for increased accountability around funding and grants,” said Tom Seidenstein, IAASB chair. “This revised standard is responsive to such trends, relating to both financial and non-financial subject matters, and the enhancements in the requirements and application material will promote consistency in the interpretation and performance of agreed-upon procedures engagements by practitioners.”

In addition to having been redrafted using the clarity drafting conventions to be consistent with other IAASB International Standards, some of the significant enhancements to ISRS 4400 (Revised), Agreed-Upon Procedures Engagements, include:

• Responding to the needs of stakeholders – Broadening the scope of the standard to meet demand for agreed-upon procedures engagements and introducing requirements and application material to address evolving engagement circumstances, such as the use of a practitioner’s expert in an agreed-upon procedures engagement.
• Providing transparency in the AUP report – Introducing requirements and application material to clarify whether or not the practitioner is required to comply with independence requirements and, if so, the determination and disclosure of the relevant independence requirements.
• Enhancing consistency in the performance of AUP engagements – Clarifying how professional judgment is exercised in an agreed-upon procedures engagement and introducing requirements and application material on engagement acceptance and continuance conditions and documentation.

ISRS 4400 (Revised) will be effective for AUP engagements for which the terms of engagement are agreed on or after January 1, 2022.

The IAASB also released an ISRS 4400 (Revised) Fact Sheet to provide implementation support in relation to the more significant changes to the standard and to help practitioners navigate and apply the revised standard. Please visit the IAASB website.  

About the IAASB

The IAASB develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the Public Interest Oversight Board, which oversees the activities of the IAASB, and the IAASB Consultative Advisory Group, which provides public interest input into the development of the standards and guidance. The structures and processes that support the operations of the IAASB are facilitated by the International Federation of Accountants (IFAC). For copyright, trademark, and permissions information, please go to permissions or contact permissions@ifac.org.

ISRS 4400 (Revised), Agreed-Upon Procedures Engagements, has been revised to respond to the growing demand for these engagements, particularly in relation to the need for increased accountability around funding and grants. A broad range of stakeholders, such as regulators, funding bodies and creditors, use agreed-upon procedures reports for a variety of reasons.

Investors, stakeholders, and society at large need to understand the value of companies beyond what they can glean from conventional financial reports – and this need is even more pressing during uncertain times such as the present.

IFAC today published its response to Accountancy Europe’s consultation, Interconnected Standard Setting for Corporate Reporting, which addresses the evolution of standard setting to enhance corporate reporting at the global level.

The current corporate reporting system needs to evolve quickly to deal with the challenge posed by a myriad of different jurisdictional requirements and an absence of widely agreed standards in various areas beyond financial reporting. The result is variable quality and lack of comparability, leading to greater cost and inefficient capital allocation for both companies and investors.

As indicated in the IFAC point-of-view on enhancing corporate reporting, a global solution is needed to achieve relevant, reliable, and comparable narrative information and metrics.

“The current reporting ecosystem does not best serve the interests of capital markets, companies or their stakeholders,” said IFAC CEO Kevin Dancey. “The options set out by Accountancy Europe to change the corporate reporting system are useful for furthering the dialogue toward a global and coherent solution. We look forward to continuing this conversation with key stakeholders.”

In its response to the consultation, IFAC endorsed six recommendations to secure an integrated global reporting structure. These include development of a global approach to international standard-setting, a conceptual framework for corporate reporting, and an oversight structure.

A global approach to these three elements— oversight, framework, and standards—is urgently needed in order to enhance corporate reporting.  While this is a challenging time for investors, companies and capital markets, the competition for capital will become more challenging, and the demand for relevant and candid information about organizations will be needed to reliably inform decisions about capital allocation and investor and other stakeholder’s assessments of long-term value creation.

Feedback on the consultation is due by April 30.  IFAC encourages stakeholders to contribute their views to this valuable consultation.