An agreed-upon procedure is a standard a company or client outlines when it hires an external party to perform an audit on a specific test or business process. The procedures, which are called audit standards, are designed and agreed upon by the entity conducting the audit, as well as any appropriate third parties.
The auditor's report on the findings is usually restricted to those parties who developed the agreed-upon procedures because of the specificity of the desired results. For example, agreed-upon procedures may be developed by one entity that is considering purchasing another business. The purchasing entity would likely develop the agreed-upon procedures to help determine specific monetary or other information about the business it may acquire.
In an audit conducted under agreed-upon procedures, the auditor provides only factual findings and does not offer opinions, conclusions or assurances in the final report. Instead, the auditor's report simply presents the facts, with the audit facilitators drawing their own conclusions from the findings.
This was last updated in February 2015
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M. Jordan & E. Stone, CPAs, audited the financial statements of Tech Company, a non-issuer, for the year ended December 31, 2019, and expressed an unmodified opinion. For the year ended December 31, 2020, Tech issued comparative financial statements. Jordan & Stone reviewed Tech's 2020 financial statements and B. Kent, an assistant on the engagement, drafted the accountants' review report that follows. Stone, the engagement supervisor, decided not to reissue the prior-year audit report but instructed Kent to include a separate paragraph in the current-year review report describing the responsibility assumed for the prior-year audited financial statements.
Stone reviewed Kent's draft and indicated in the following supervisor's review notes that the draft contained several deficiencies
.
Accountants' Review Report—Kent's Draft
We have reviewed and audited the accompanying financial statements of Tech Co, which comprise the balance sheets as of
December 31, 2020 and 2019, and the related statements of income, changes in stockholders' equity, and cash flows for the years then ended, and the related notes to the financial statements. These engagements were conducted in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA and generally accepted auditing standards. A review includes primarily applying analytical procedures to management's
financial data and making inquiries of company management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement whether due to fraud or error.
Accountant's Responsibility
We are required to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to the financial statements for them to be in accordance with accounting principles generally accepted in the United States of America. We believe that the results of our procedures provide a
reasonable basis for our conclusion.
Accountant's Conclusion
Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in accordance with accounting principles generally accepted in the United States of America. Because of the inherent limitations of a review engagement, this report is intended for the information of management and should not be used for any other purpose.
Other
Matter
We audited the financial statements for the year ended December 31, 2019, and our report was dated March 2, 2020. We have no responsibility for updating that report for events and circumstances occurring after that date.
Jordan and Stone, CPAs
Chicago, IL
March 1, 2021
Required:
These supervisor's review notes may or may not be correct. For each item a-m, indicate whether Stone is correct or incorrect in the criticism of Kent's draft.