The new agreed-upon procedure standard (ISRS 4400 (revised))

In recent years many jurisdictions have increased the thresholds for audits. This in turn increased the demand for non-audit services such as review, other assurance engagements, compilation engagements and agreed upon procedures. The choice of the service depends on the circumstances for each entity and requires careful consideration. For this reason, it is important to know what the revised ISRS 4400 (revised) entail.

To address public interest issues relevant to agreed-upon procedures engagements, the scope of the revised standard has been broadened to meet the demand of stakeholders on both financial and non-financial subject matters.

New requirements (and application material) clarify the various parties’ responsibilities in relation to an agreed-upon procedures engagement as follows:

• Engaging party: the party(ies) that engage(s) the practitioner to perform the agreed-upon procedure engagement (Para 13(c) and A11)
• Responsible party: the party(ies) responsible for the subject matter on which the agreed-upon procedures are performed (Para 13(l))
• Intended users: the individual(s) or organisation(s), or group(s) that the practitioner expects will use the agreed-upon procedures report. In some cases, there may be intended users other than those to whom the agreed-upon procedures report is addressed (Para 13(g) and A10)
• Practitioner: the individual(s) conducting the engagement (usually the engagement partner or other members of the engagement team, or, as applicable, the firm) (Para 13(h))

Although the revised standard does not include a precondition for the practitioner to be independent, the new requirement and application material recognise that even when the practitioner may not be required to be independent, the practitioner may agree with the engaging party that compliance with independence requirements is appropriate for the particular agreed-upon procedure engagement. With this the agreed-upon procedure report now requires a statement on independence.

Professional judgement is pivotal to our profession. With this the revised standard now requires the practitioner to exercise professional judgement throughout the engagement, including in accepting, conducting and reporting on the agreed-upon procedure engagement, taking into account the circumstances of the engagement. With the introduction of the new requirement in relation to accepting and conducting the engagement a practitioner must:

• Understand the purpose of the engagement.
• Decline the engagement if the practitioner becomes aware of any facts or circumstances indicating that the procedures agreed are inappropriate for the purpose of the engagement.
• Accept or continue the engagement only when certain conditions are met.
• Communicate with the firm if information obtained that would have caused the firm to decline the engagement.
• Clarify the specificity with which the agreed-upon procedures and findings are described.
• Highlight that certain procedures may be prescribed by law or regulation. 

Other significant changes to the standard that needs to be highlighted include:

• The term “factual findings” have been replaced with “findings” which is defined as the factual results of procedures performed.
• Findings should be capable of being objectively verified and exclude opinions or conclusions in any form as well as recommendations.
• A practitioner expert can assist the practitioner however the practitioner must be able to be involved in the work of the practitioner’s expert to an extent that is sufficient to take responsibility for the findings.
• The report is not required to include a statement that the report is restricted to those parties that have agreed to the procedures. Such restriction is now based on the discretion of the practitioner.

It is clear that agreed-upon procedures provide great opportunities to firms to grow and provide value services to clients; with these type of engagements covering both financial and non-financial subject matter.

Other resources:

IFAC AUP Growth Value Report 2020

ISRS 4400 (Revised) Fact Sheet

16 December 2022