Agreed-Upon Procedures – ISRS 4400
The project objectives are to:
- Redraft the standard using the clarity drafting conventions so that this standard is consistent with other IAASB International Standards
- Revise the standard to better reflect practice in AUP engagements being undertaken
During consultations on the IAASB’s 2015-2019 Strategy and the related 2015-2016 Work Plan, many stakeholders expressed the need to revise ISRS 4400 to meet the growing demand for agreed-upon procedure (AUP) engagements. In response to the stakeholders’ comments, the IAASB established a working group to explore issues involving agreed-upon procedure engagements.The issues identified and discussed at the IAASB meetings will be used to revise ISRS 4400 and possibly develop new standard(s) or guidance that would address engagements where there is a combination of agreed-upon procedures and assurance.
Since its inception in 2015, the AUP Working Group has conducted outreach with:
- Users of AUP reports such as securities regulators and funding agencies;
- National auditing standard setters in Africa, Asia, Europe and North America;
- Practitioners who perform AUP engagements, including representatives from large multi-national firms and the International Federation of Accountants’ Small-and-Medium-Sized-Practices Committee; and
- Other organizations subject to regulatory oversight.
As part of the AUP Working Group's information gathering activities, the working group has also considered projects undertaken in a number of jurisdictions by national auditing standard setters and professional accounting bodies such as the Australian Auditing and Assurance Standards Board, the American Institute of Certified Public Accountants, the Japanese Institute of Certified Public Accountants and the Royal Netherlands Institute of Chartered Accountants to explore how AUP engagements can be enhanced in light of the increasing demand.
The information gathering activities and discussions with the Board and the CAG formed the background for the development of the Discussion Paper which was published in November 2016. The Discussion Paper sets out the key features of an agreed-upon procedures engagement and explores how they are undertaken, including the extent to which practitioners find existing requirements and guidance helpful or challenging. The Discussion Paper also explores the demand for engagements that combine reasonable assurance, limited assurance, and non-assurance engagements, and whether the IAASB’s existing International Standards are appropriate.
Fifty-four responses to the Discussion Paper were received from a wide range of stakeholders and jurisdictions. Significantly, the responses were overwhelmingly supportive of the views and conclusions expressed in the Discussion Paper relating to a revision of ISRS 4400. For example, a significant majority (more than 80% of the respondents) supported that:
- Professional judgment has a role in an AUP engagement, particularly in the context of professional competence and due care;
- ISRS 4400 (Revised) should be clarified to include non-financial information within its scope;
- Unclear or misleading’ terminology should be prohibited unless required by law or regulation;
- ISRS 4400 (Revised) should address the use of the work of a practitioner’s expert; and
- The AUP report can be provided to a party who is not a signatory to the engagement agreement provided the party has a clear understanding of the AUP and the conditions of the engagement.
In addition, respondents agreed that guidance on multi-scope engagements would be useful, but that the guidance should be developed after completing the ISRS 4400 revision project.
In its September 2017 meeting, the Board approved a standard-setting project proposal to revise ISRS 4400, subject to clarifications around the use of judgment, independence, restriction of the report of factual findings and required documentation. The AUP Task Force made the suggested clarifications and submitted the project proposal to the Steering Committee before finalizing it.
Among other matters, the project proposal includes the background, scope, objective and how the project to revises ISRS 4400 serves the public interest. It also includes the outline of the project and a tentative timetable.
On November 15, 2018 the International Auditing and Assurance Standards Board (IAASB) published its Exposure Draft of Proposed International Standard on Related Services 4400 (Revised), Agreed-Upon Procedures Engagements. Agreed-upon procedures (AUP) engagements are widely used in many jurisdictions and the demand for these engagements continues to grow. To ensure that the IAASB’s standard on AUP engagements remains relevant in the current business environment, the IAASB proposes to enhance key concepts in the standard, including:
- The role of professional judgment in an AUP engagement.
- Disclosures relating to the practitioner’s independence or lack thereof.
- Guidance on appropriate or inappropriate terminology to describe procedures and findings in AUP reports.
- The use of a practitioner’s expert in an AUP engagement.
- Restrictions on the distribution and use of the AUP report.
Comments are due by March 15, 2019.