Acceptance of an Agreed‑upon Procedures Engagement

Agreed‑upon procedures engagements under the AUASB Standards encompass verification engagements under the NGERS and CFI, as they involve the conduct of procedures agreed with the engaging party and result in a report of factual findings which draws no conclusions.  Agreed‑upon procedures engagements may be initiated by the Regulator under NGERS or CFI.  There are no requirements in the legislation or regulations for entities to obtain agreed‑upon procedures reports, although they may seek such reports voluntarily.  Agreed‑upon procedures reports have limited use, however, as the intended users need to draw their own conclusions with respect to the subject matter.

The assurance practitioner applies both the NGER Audit Determination and ASRS 4400 when conducting these engagements. In accepting an agreed-upon procedures engagement, ASRS 4400^[57] requires the assurance practitioner to consider whether the report of factual findings is likely to meet the needs of the intended users, as those users will need to draw their own conclusions, based on the factual findings combined with any other information obtained by them. By understanding the purpose for which the report of factual findings is required the assurance practitioner can satisfy themselves that the engagement has a rational purpose and that it is not likely that users will construe the outcome of the engagement as providing an assurance conclusion about the subject matter. If the assurance practitioner is not satisfied that an agreed-upon procedures engagement is appropriate, based on their understanding of the purpose of the engagement, then they may either not accept the engagement, withdraw from the engagement or, if appropriate, agree to the conduct of an assurance engagement.

The written terms of engagement are required to include, in addition to the matters required by the NGER Audit Determination,^[58] the following under ASRS 4400:^[59]

1. Statements that:
   1. The procedures performed will not constitute a reasonable or limited assurance engagement and that accordingly no assurance will be provided;
   2. The intended users are expected to conduct their own assessment of the findings, combined with other information available to them and, if necessary, perform further procedures in order to obtain sufficient appropriate evidence on which to base any conclusion on the subject matter; and
   3. Distribution of the report of factual findings will be restricted to the engaging party and the intended users identified;
2. The responsibilities of the assurance practitioner;
3. Reference to the Independence and Conduct Declaration, which the assurance practitioner is required to provide to the engaging party prior to agreeing the terms of engagement,^[60] which is confirmation that the assurance practitioner will apply ethical requirements as required by ASRS 4400;^[61] and
4. Reference to the expected form of the report of factual findings.

An example engagement letter for an agreed-upon procedures engagement is provided in Appendix 4, Example 1.

Planning and Performing an Agreed-upon Procedures Engagement

As the procedures to be conducted are agreed at the outset, planning is restricted to determining how the procedures can be conducted in an effective manner. It is not necessary for the assurance practitioner to carry out a risk assessment or determine materiality, as the procedures cannot be altered by them to respond to assessed risks. The procedures are decided by the engaging party, to meet their information needs, and findings are assessed by the intended users and not by the assurance practitioner.

Although the NGER Audit Determination requires the assurance practitioner to amend the plan if the procedures deviate from what was originally planned,^[62] this does not mean that the assurance practitioner has the discretion to alter the procedures without the express agreement of the engaging party. The assurance practitioner is not to exercise professional judgement in determining or modifying the procedures to be performed under ASRS 4400,^[63] as it is the responsibility of the engaging party to determine the procedures which they require conducted to meet their objectives.

Reporting on an Agreed-upon Procedures Engagement

When reporting on an agreed‑upon procedures engagement, ASRS 4400 requires the assurance practitioner to report only factual findings and not to include any evaluation or draw any conclusions.^[64]  In addition to the matters required by the NGER Audit Determination to be included in a verification report and those reflected in the NGER Audit Determination Handbook verification report template, ASRS 4400 also requires the report to contain some additional matters.^[65]  In complying with ASRS 4400, these matters can be addressed by including the following information in the agreed‑upon procedures report:

1. A statement that the engagement was performed in accordance with ASRS 4400;^[66]
2. A statement that the assurance practitioner has complied with the independence and conduct declaration provided to the engaging party;^[67]
3. Identification of any procedures agreed in the terms of engagement which could not be performed and why that has arisen;^[68]
4. A restriction on the use and distribution of the report to those parties identified in the report;^[69] and
5. A statement that the report relates only to certain information specified and it does not extend to the entity’s report or application as a whole.^[70]

Appendix 5, Example 1 provides an example report of factual findings which meets the requirements of both ASRS 4400 and the NGER Audit Determination.