Agreed-Upon Procedures

An agreed-upon procedures engagement is one where you and the Chartered Accountant agree, in advance, on a specific set of procedures to be carried out on a defined financial matter. The accountant performs exactly those procedures and reports the factual findings, for example the result of recomputing a figure or vouching a sample of transactions. You decide what conclusions to draw from those findings. It is a related service under ICAI standards, used when you need targeted verification rather than a full audit.

An audit examines a complete set of financial statements and ends with the auditor's opinion on whether they show a true and fair view. An agreed-upon procedures engagement is narrower: the accountant performs only the procedures you specify, on the items you specify, and reports what was found. No opinion or assurance is expressed. Because the scope is fixed in advance, an AUP is usually quicker and more contained than a statutory audit, and you interpret the findings yourself.

Organisations use AUP engagements when they need independent verification of a specific matter without commissioning a full audit. Common situations include confirming compliance with a loan covenant for a lender, verifying that grant or subsidy funds were spent on eligible items, checking royalty or revenue-share calculations under a contract, examining a sample of transactions during acquisition due diligence, or testing a particular internal control. A lender, grantor, regulator, or business partner often requests the engagement, though a company may also commission one for its own assurance.

The ICAI standard centres on agreed-upon procedures regarding financial information, such as account balances, transactions, or contractual calculations. The framework also accommodates non-financial subject matter where the accountant has adequate knowledge of the area and clear criteria exist to measure the findings against, for example verifying a reported quantity or a compliance condition. We confirm at the scoping stage whether a particular subject matter can be examined this way.

No. An agreed-upon procedures engagement is not an assurance engagement. The Chartered Accountant reports the factual results of the procedures performed and does not express an audit opinion, a review conclusion, or any form of assurance. The report describes what was examined and what was found, including any exceptions, and the parties who receive it draw their own conclusions from those facts.

In India these engagements follow the Institute of Chartered Accountants of India's Standard on Related Services (SRS) 4400, which deals with engagements to perform agreed-upon procedures and sets out the accountant's responsibilities and the form and content of the factual-findings report. It aligns with the international standard, ISRS 4400, issued by the IAASB. We carry out and report each engagement in accordance with the version of SRS 4400 in force at the time.

The ICAI Code of Ethics does not require independence for an agreed-upon procedures engagement, because no assurance is being given. A lender, grantor, regulator, or contract may still set its own independence condition for the engagement. Where the accountant is not independent, SRS 4400 requires that fact to be stated in the report, so the recipients are aware of it. We confirm any independence requirement before accepting the engagement.

Scope is agreed before any work begins. We discuss the matter to be examined with you and any third party who will rely on the report, such as a lender or grantor, and document the exact procedures, the items they apply to, and the parties who will receive the report. This is recorded in an engagement letter that both sides sign. Nothing is examined outside the agreed procedures, which keeps the cost and timeline defined from the start.

The procedures are whatever you and the accountant agree are relevant to the matter. Typical methods include inspecting documents and records, recomputing figures and checking clerical accuracy, comparing one set of data against another, observing a process or count, obtaining confirmations from third parties, and making inquiries followed by analysis. Each procedure and its result is documented, so the report can state precisely what was done and what was found.

The report states the purpose of the engagement, lists the procedures performed, and presents the factual findings for each, including any exceptions identified. It records that the work was carried out under SRS 4400, that the engagement is not an assurance engagement and no opinion is expressed, and that further procedures might have surfaced other matters. The report is signed by the Chartered Accountant in personal name, with the firm's name where a firm is engaged, and quotes the ICAI membership number.

An agreed-upon procedures report is restricted to the parties who agreed the procedures, since the work was designed around their specific needs. It is not intended for general circulation or for parties who did not take part in setting the scope, as they may misread findings that were never meant to answer their questions. The recipients are named when the scope is agreed, and the report states that its distribution is limited to them.

In most cases, yes, because the work is confined to the specific procedures agreed rather than a full examination of the financial statements. You pay for the defined scope, and the timeline reflects that narrower focus. The exact cost and duration depend on the matter examined, the volume of records, and the procedures required, all of which are set out in the engagement letter before work starts, so there are no open-ended charges.