AUD - Agreed-Upon Procedures and Prospective Financial Statements
When a CPA examines a client's projected financial statements, the CPA's report should say
"...included such procedures as we considered necessary to evaluate both the assumptions used by management and the preparation and presentation of the projection."
agreed upon conclusions should include
"accordingly, we do not express an opinion or conclusion"
if an audit engagement is changed (with reasonable justification) to an agreed-upon procedures engagement then the report should
not reference the original engagement but may include a reference to procedures performed in original audit.
only examination report must have
opinion on AICPA presentation guidelines
the date of an agreed-upon procedures report is ordinarily limited to
the date the procedures are completed
"Partial presentations" are presentations of prospective financial information which would not ordinarily be appropriate for general use because they omit one or more of these essential elements:
(a) sales or gross revenue, (b) gross profit or cost of sales, (c) unusual or infrequently occurring items, (d) provision for income taxes, (e) discontinued operations or extraordinary items, (f) income from continuing operations, (g) net income, (h) earnings per share, and (i) significant changes in financial position.
modifications for examination opinion
- AICPA presentation guidelines not followed (qualified) - Significant assumptions not disclosed (adverse) - Significant assumption does not provide reasonable basis (adverse) - Scope limitation (disclaimer)
Conditions of agreed-upon procedures engagements
- Independence of the auditor - Agreement of the parties - Measurability and consistency - Sufficiency of the procedures - Use of the report can be general or restricted to specified parties - Responsibility for the subject matter - Engagements (must include summary of procedures)
all prospective fin reports must
- be identified as prospective financial statements - comply with AICPA standards - have caveat that expected results may not be achieved - limit use for projections
an examination of a financial forecast is a professional service that involves
- evaluating the preparation of the prospective financial statements - evaluating the support underlying the assumptions - evaluating the presentation in conformity with AICPA guidelines - issuing an examination report
reports on prospective financial statements should include
a caveat that prospective results may not be achieved and that accountant has no responsibility to update after report date
A report on agreed-upon procedures should include
a list of the procedures and the related findings
an accountant's examination report, not compilation report, should include
a statement that the examination includes an evaluation of the support for the assumptions underlying the projection
prior to finalization and issuance of an attestation following SSAE guidelines for prospective statements, auditor must get
acknowledgement from client that procedures were appropriate to meet intended purpose of engagement
a presentation of pro forma financial statements should include
all significant direct effects related to the transaction. indirect effects are excluded
practitioner's report should also include
materiality thresholds
scope is limited for
compilation reports and agreed upon procedures
only agreed upon procedures engagements
must enumerate procedures performed
financial forecasts are appropriate for general use, but
financial projections are not
a compilation of prospective statements does not require
independence
an accountant preparing prospective fin statements should only
inquire about accounting procedures and principles used to make prospective statements
reviews provide
limited assurance
a statement referring to AICPA standards should be included in a
practitioner's report on agreed-upon procedures
agreed upon procedures engagements do not
provide assurance of any sort
an accountant's report on a review of pro forma financial information should include
reference to the financial statements from which the historical financial information is derived
financial projections are "restricted use" and are only for
the responsible parties and third parties with whom the responsible party is negotiating directly. only financial projections based on expected conditions are for general use