The new Agreed-Upon Procedures standards are coming into effect. The effective date is based on the date of the terms of agreement (engagement letter) which provides practitioners with a little wiggle room as to when these new standards are adopted. For any terms of agreement reached after January 1, 2022 the new standards are effective.
Which engagements do these new standards impact? These new standards replace the specified auditing procedures standards. Here in BC, these engagements are most commonly executed for the BCSFA (which has taken over from the Real Estate Council of BC for the regulation of realty brokerages) and the Law Society when reporting on the applicable Accountant’s Reports. In other provinces the use of Agreed-Upon Procedures standards will vary.
Considerations around this new standard:
- Templates: There are no professionally available templates that we are aware of. There is no draft engagement letter (other than the excerpts provided in the HB which only addresses the assurance requirements not any of the legal or regulatory clauses required in an engagement letter), no checklists or documentation tools and the only sample engagement reports available are the generic samples in the HB appendix.
See Clearline Consulting’s BCFSA (BC Real Estate) Accountants Report template. The resource is customized for this specific engagement however it could be tailored to other AUP engagement.
- Independence: The standard does not require the practitioner to be independent from the information being reported upon. Currently the CPA Code does required independence when performing a specific auditing procedures engagement under HB 9100, and has not yet been updated to address CSRS 4400. Keep top of mind that the BCSFA and Law Society regulations do require practitioners reporting on these engagements to be independent and we are aware of cases where a lack of independence related to these engagements has trigger disciplinary action. We recommend that should the time come when you are considering accepting an AUP engagement where you are not independent that you check with your provincial CPA body.
- Work Effort: As you have already suspected, the new standard is going to require more work effort. If you have not already issued those engagement letters you should be considering whether or not you will need to communicate price increases. We know these engagements may already be non-recurring price sensitive engagements, which is why we here at Clearline CPA only execute these engagements on behalf of our corporate clients.
The AUP standard is very flexible. Practitioners can report on financial or non-financial information, can engagement directly with the responsible party or the intended users, can tailor the procedures to anything agreed upon and are not bound by requirements to be independent (presuming the CPA Code of Conduct supports this in your province). Because the practitioner is simply providing a report of the factual results of the AUP, no assurance is expressed. Instead, users of the report assess for themselves the procedures and findings reported by the practitioner and draw their own conclusions from the work. For example, the practitioner may be engaged to help the client evaluate the validity of their accounts payable at a certain date.
We believe that these engagements are perfectly placed to provide users with more cost-effective product than say a historical financial statement audit. Consider possible future services to your clients through the execution of AUP engagements, in areas such as:
- Compliance with royalty, franchisor or common area cost agreements
- Compliance with payables or procurement procedures
- Due diligence procedures
- Accounts receivable subsequent receipts
- Inventory counts or inspections
- Payroll compliance procedures
- External confirmations of amounts, transactions or contact details
We have created an AUP engagement template file for practitioners specially for BCFSA Accountant Report engagements. The Caseware file contains a sample engagement letter, engagement acceptance and completion checklists, a draft representation letter and a templated Agreed-Upon Procedures Engagement Report. Note that the template has been fully customize for BCFSA procedures and would need to be modified internally for any other type of AUP engagement.