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