AUP engagements: independence and using experts
What ISRS 4400 (Revised) expects on independence and on using a practitioner's expert in agreed-upon procedures work, and what to record on file.
By Achekam · · 5 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
A donor asks an NGO in Nairobi for a report on how a grant was spent. A franchisor in Johannesburg wants its franchisees' turnover checked before royalties are calculated. A state agency in Abuja needs a contractor's claims tested against the contract. None of them wants an audit opinion. Each wants a firm to carry out specific procedures and report what it found.
That is an agreed-upon procedures engagement, governed by ISRS 4400 (Revised). Two questions come up early in nearly every one: does the firm need to be independent, and what if the procedures need knowledge the team does not have? This article covers both, and how to record the answers.
Why independence comes up in agreed-upon procedures work
The IAASB says ISRS 4400 was revised to respond to growing demand for these engagements, particularly where funding and grants call for more accountability. The parties relying on an AUP report, such as donors, lenders, franchisors and regulators, are often not the party that engaged the firm. They need to know whether the practitioner had any relationship with the entity that might colour how the procedures were performed and the findings described.
The IAASB states that the revised standard includes enhancements relating to, among other matters, the exercise of professional judgement, compliance with independence requirements, and engagement acceptance and continuance. The standard itself sets out what is required on independence in different situations, so read it for the engagement in hand rather than relying on a summary. In practice the firm needs to establish, before accepting:
- whether the terms of the engagement, the law or regulation, or the user require independence;
- if they do, which independence requirements apply and whether the firm meets them;
- if they do not, whether the firm is nonetheless independent, because the report will need to say where it stands.
An AUP engagement for an existing audit client raises the question more sharply, because the same relationship may already be subject to independence rules for the audit.
Stating the independence position in the report
The IAASB describes the revised standard as bringing greater clarity and transparency to the agreed-upon procedures report. Readers of an AUP report cannot see the engagement letter. The report is where they learn what was done, what was found and on what basis the firm acted.
Whatever the position, state it plainly in the report in the terms the standard requires. Users who expected independence and find out later that the firm was not independent will lose confidence in the findings, however carefully the procedures were performed.
Using a practitioner's expert
The IAASB states that the revised standard includes enhancements relating to using the work of a practitioner's expert. AUP engagements often need one: an engineer to check quantities on a construction claim, an actuary to recompute a benefit, an IT specialist to extract data from a system.
When an expert is involved, the practical steps follow the same logic as in an audit:
- Decide whether an expert is needed, and at what point, before agreeing the procedures with the engaging party.
- Assess the expert's competence, capabilities and objectivity, including any relationship with the entity.
- Agree in writing what the expert will do, the procedures in which their work is used, and how findings will be reported.
- Evaluate the expert's work for adequacy before relying on it.
- Describe the expert's involvement in the report in the way the standard requires.
Our article on using an expert covers evaluating the expert's work in more depth.
Acceptance and continuance under the revised standard
The IAASB says the revised standard promotes consistency in how AUP engagements are performed. Acceptance is where consistency starts. Before accepting, the firm should be satisfied that:
- the engaging party understands that the report gives findings, not an opinion or a conclusion;
- the procedures can be described in clear, objective terms that do not need the practitioner to form an opinion;
- the firm has, or can get, the skills the procedures need, including any expert;
- the independence position is known and acceptable to the users.
Our guide to agreed-upon procedures under ISRS 4400 covers the engagement as a whole.
Recording declarations and specialists in Achekam
Achekam lets staff record annual independence declarations and any interest, relationship or gift involving a client, and anyone can check whether a person has an active independence exception for a client. For an AUP engagement, that check is a quick first step before naming the team, and the declarations support the position stated in the report.
Achekam records specialists on an audit through its Specialists & Experts screen. For an AUP engagement, keep the expert's terms, your assessment of their objectivity and your evaluation of their work in the working papers. One limit to know: the Audit Resource Pools and Delivery Centres screens stay empty, because nothing yet adds a pool or a centre.
Achekam ships working-paper template packs written in its own words, including packs for ISRS 4400 and ISRS 4410 engagements. They are marked as unapproved platform content until the firm adopts and approves them, so a partner should review the pack against the firm's methodology before first use.
Engagement letter points
The engagement letter carries much of the weight in AUP work, because the procedures are whatever was agreed. Make sure it covers:
- the purpose of the engagement and the intended users;
- each procedure, described precisely enough that two practitioners would do the same work;
- the independence position, and the basis on which it was determined;
- any expert's involvement;
- the form of the report, and any restriction on its use or distribution;
- that no assurance is expressed.
The IAASB's page on ISRS 4400 (Revised) gives access to the standard and its supporting material, and is the place to confirm the exact requirements on independence and experts.
Before accepting your next AUP engagement, ask the engaging party in writing whether the users expect the firm to be independent. The answer shapes the team, the letter and the report.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
