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An AUP or an Audit: Which Way Should You Go?


from Carr, Riggs & Ingram

The public accounting profession offers a number of services, making it difficult for many to understand which direction is best for a particular need. Two services that are often confused are audits and agreed-upon procedures (AUPs). An AUP engagement offers the client greater flexibility than what a traditional audit can provide. It is likely to be more suitable than an audit for specific procedures addressing a particular need. AUPs typically involve three parties: the responsible party (normally the one who defines the certain procedures or objectives), the specified party (the client being serviced), and the practitioner (the CPA).

The Final Destinations: AUP or an Audit

The purpose of an audit is for the practitioner to provide an opinion on the financial statements as a whole. By contrast, an AUP meets needs that an audit cannot address. For example, an AUP might cover particular elements of the financial statements (such as accounts receivable or inventory), the requirements of a lease or debt agreement, or the effectiveness of internal controls. Conversely, it could involve something unrelated to the financial statements, such as contractual obligations, the Health Insurance Portability and Accountability Act (HIPAA), or the Federal Information Security Management Act (FISMA).

Is the AUP a Smoother Path?

The primary benefit of an AUP is that the responsible and specified parties discuss their needs with the practitioner, and the specific procedures are developed to address the parties’ requirements. The responsible party may be the ultimate benefactor or designee of the controls or financial aspects of the object. The specified party is the entity where the controls or financial transactions reside. The practitioner can assist the two parties in determining the procedures. However, the responsible and specified parties are accountable for ensuring that the performed procedures meet their needs. Additionally, the AUP is more cost-effective than a full financial statement audit in most cases.

The Guiding Opinions

An AUP does not include an opinion, but the client does receive a final report. It provides the details and results of each procedure performed. This report enables the parties to evaluate the results according to their specific needs. By developing the necessary agreed-upon procedures, the parties can clearly understand the underlying information that they need. Unlike an AUP, an audit provides an opinion on the overall financial statements.

Follow CRI to Learn Whether You Need an AUP or an Audit

Consider an AUP when you either have a specific requirement or should address certain information. Additionally, remember that an AUP engagement is often less expensive than an audit. Contact CRIfor help deciding which road – an AUP or an audit – is the best one for your organization’s current need.

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