Agreed Upon Procedures
Sometimes you need one specific question answered rather than an opinion on a whole set of financial statements. Agreed upon procedures do exactly that: you and whoever will rely on the report agree the precise procedures in advance, we perform them, and we report what we found without drawing an overall conclusion. It is faster and cheaper than an audit because it is narrower by design.
1
Question
What needs answering
2
Agree
Procedures in writing
3
Confirm
All parties sign off
4
Perform
Exactly as agreed
5
Report
Factual findings only
How It Works
01
Defining the Question
We start with what the requesting party actually needs to know. A vague brief produces procedures that answer the wrong question, and because the report offers no conclusion, an imprecise question yields an unusable report.
- The specific question or assertion identified
- Who will rely on the report established up front
- What decision the report will inform
- Scope boundaries agreed explicitly
02
Designing the Procedures
Procedures must be sufficiently precise that a different practitioner performing them would obtain the same result. Verify, agree, recalculate and inspect are the verbs; assess and evaluate are not.
- Each procedure written in unambiguous terms
- Sample sizes and selection method specified
- Source documents to be inspected identified
- Procedures reviewed for objectivity and repeatability
03
Confirming with All Parties
Everyone relying on the report agrees the procedures before we start. This is what prevents the common failure where a report is delivered and the funder says it does not answer their question.
- Written agreement from you and the relying party
- Acknowledgement that no conclusion will be expressed
- Distribution of the report restricted and agreed
- Engagement letter signed by all parties
04
Performing the Procedures
We perform exactly what was agreed, no more and no less. Where a procedure cannot be completed we report that fact rather than substituting an alternative on our own initiative.
- Procedures performed precisely as documented
- Exceptions and deviations recorded as found
- Procedures that could not be completed reported as such
- Working papers retained supporting every finding
05
Reporting Factual Findings
The report states what was done and what was found. It expresses no opinion and no conclusion, and we are explicit about that so nobody reads assurance into it that is not there.
- Each procedure listed with its corresponding finding
- Exceptions quantified and described factually
- No opinion or conclusion expressed
- Restricted distribution stated on the report
What You Receive
- Written procedures agreed by you and the relying party
- Engagement letter signed by all parties
- Report listing each procedure with its factual finding
- Exceptions quantified and described
- Explicit statement that no conclusion is expressed
- Working papers retained supporting every finding
Indicative Timeline
Duration follows scope, from a few days for a narrow verification to two or three weeks for a broad set of procedures. Agreeing the procedures usually takes longer than performing them, particularly where several parties must sign off.
- Defining the question and drafting procedures: three to five days
- Agreement from all relying parties: dependent on parties
- Performing the procedures: one to two weeks typically
- Reporting: within a week of completion
Common Applications
Agreed upon procedures suit a specific question with an identified party relying on the answer.
Grant Conditions
Verifying that funds were spent on eligible items in accordance with a funding agreement.
Royalty and Commission
Verifying amounts calculated and paid under a licensing or agency contract.
Contract Compliance
Confirming that specific contractual obligations were met during a defined period.
Acquisition Support
Verifying particular balances or transactions ahead of a transaction, short of full due diligence.
Regulatory Submissions
Verifying figures submitted to a regulator where the regulator requires practitioner involvement.
Internal Requests
Answering a board or committee question about a specific balance, process or period.
Frequently Asked Questions
Why does the report contain no opinion?
Because the procedures were chosen by you rather than designed by us to support a conclusion. We did not decide what was sufficient, so it would be misleading to express assurance. You draw your own conclusion from the facts reported.
Who can rely on the report?
Only the parties who agreed the procedures, and distribution is restricted accordingly. That restriction is stated on the report because a third party who did not agree the scope cannot know whether the procedures were adequate for their purpose.
Is this cheaper than an audit?
Usually considerably, because the scope is narrow and no overall conclusion has to be supported. That is the point: you pay for the specific question rather than for assurance over an entire set of financial statements.
What if you find something concerning outside the agreed scope?
We report it factually to you. We do not extend the procedures unilaterally, but nor do we ignore something material simply because it fell outside the brief. Where it changes what you need, the scope can be amended by agreement.
Can a funder insist on this instead of an audit?
Many do, and it is often the sensible choice. A funder wanting confirmation that a grant was spent on eligible items does not need an opinion on the whole entity, and agreed upon procedures answer precisely that question.
How specific do the procedures need to be?
Very. A procedure such as assess the reasonableness of expenditure is not performable. Agree twenty five selected invoices to supporting documentation and confirm each falls within the approved budget categories is. Precision is what makes the report meaningful.
Related Services
This sits inside our Audit and Assurance practice. Related work: Business Advisory where transaction support is needed rather than verification, and Statutory and External Audit where an opinion is actually required.
