Agreed upon Procedures Can Provide You with All the Facts
With agreed upon procedures, your small business or middle market company can get the information it needs to move forward with confidence. These reports can be created with specific protocols in mind, providing you with a deeper understanding of your financial situation.
There are many reasons why you might want to consider an agreed upon procedure which includes:
- Evaluating a merger or a potential acquisition
- Preparing for litigation in a fraud case
- Review and testing of internal controls
- Compliance reviews
- Loan portfolio reviews
- And more
Not only can the report provide you with detailed information that you wouldn’t be able to compile on your own, it also provides you with independently derived findings. This particular feature of agreed upon procedures makes them a good choice for clients who need to report to a third party.
Agreed upon procedures require a unique approach. Because each procedure is thoughtfully created for a particular assertion, it can be catered to the nature, timing, and extent of your particular needs.
Although you might expect a professional team of CPAs to provide you with their opinion on the findings, agreed upon procedures allow you to come to your own conclusions after reading the facts in the report. It is the first step in reviewing your situation so you can make the best financial decisions for your business.
What you should expect to find in a report
- A detailed project plan
- Formal information requests
- A hard copy of the independent auditor’s report
- A secure PDF file of the independent auditor’s report
Flexibility of agreed upon procedures
Because agreed upon procedures can be customized, there is a lot of flexibility. Although agreed upon procedures are most often used to organize financial data, they can also provide useful guidance for engagements regarding non-financial information. All reports are restricted to the parties that have agreed to the procedures due to the complex nature of the reports and their findings.
Agreed upon procedures FAQ
What exactly is an agreed upon procedure?
The concept of an agreed upon procedure can seem a bit foreign, unless you’ve had a lot of experience with these kinds of reports. One definition, according to businessdictionary.com is:
Engagements related to agreed-upon procedures to specified elements or accounts. Occur when an accountant is hired to issue a report on filings that are based on specific financial statement items. The report users agree on the procedures that are to be conducted by the accountant that the user believes will be suitable. In addition, the user will take responsibility for the adequacy of these procedures.
The area of agreed upon procedures is a bit gray because of their customizable nature. Any report that could be generated based on a company’s finances has the potential to become an agreed upon procedure.
How do I know if I need an agreed upon procedure?
Some of the reasons why you might consider an agreed upon procedure are listed above, but how do you know if it’s something you really need?
In some cases, an agreed upon procedure is recommended so that a business can get a clearer picture of a financial situation that has eluded them. For example, a business may want to learn, without a shadow of a doubt, whether or not their newly implemented internal controls are working the way they’re supposed to. In other cases, an agreed upon procedure may actually be required as a part of a compliance review.
Why don’t CPAs provide their opinion on the findings?
Gathering professional advice is appropriate in nearly every situation, so it may seem strange that the CPA conducting the agreed upon procedure wouldn’t provide his or her expert advice on the findings.
An agreed upon procedure is a fact-finding mission. Its purpose is not to create a solution. With the right agreed upon procedure, you shouldn’t need that kind of advice. The data will be so detailed and compelling that it will provide its own answers.
Why hire a CPA for an agreed upon procedure?
Most businesses do whatever it takes to save money, so conducting an agreed upon procedure yourself might seem like the right solution. However, it’s a bad idea.
CPAs are highly trained in the area of agreed upon procedures. The likelihood of something getting overlooked or not well-researched is next to nothing. When conducting the procedure yourself, you’re likely to overlook something extremely important because you and your staff aren’t properly trained.
Hiring a professional means you’re able to keep your time free to do the things that are important for your business. Agreed upon procedures can take up a lot of your time, frustrating you in the process.
Finally, it may be required as part of your compliance review that the agreed upon procedures are conducted by a third party.
For more questions about agreed upon procedures please contact our CPA office serving the greater Long Beach area.