Easy Office
LCI Learning

Engagements regarding Financial Information

Rahul Bansal , Last updated: 05 July 2010  
  Share


ENGAGEMENTS TO PERFORM AGREED UPON PROCEDURES

REGARDING FINANCIAL INFORMATION

 

1.         INTRODUCTION – In an engagement to perform agreed upon procedures, the auditor is engaged by the client issue a report of factual findings, based on specified subject matter of specified elements, accounts or items of a financial statement. For example, an engagement to perform agreed upon procedures may require auditor to perform certain procedures concerning, say, accounts payable, accounts receivable, purchases from related parties, etc.

This AAS may also provide useful guidance for engagement to perform agreed upon procedures regarding non-financial information, provided he has adequate knowledge of the subject matter and reasonable criteria exist on which to base his findings.

 

2.            OBJECTIVE – To establish standard and provide guidance3 on the auditor’s professional responsibilities when an agreed upon procedures regarding financial information is undertaken and on the form and content of the report that the auditor issues in connection with such an engagement.

 

3.            OBJECTIVE OF AN AGREED UPON PROCEDURES ENGAGEMENT – The objective on an engagement is for the auditor to carry upon procedures engagement is for the auditor to carry out procedures of an audit nature to which the auditor and the entity and any appropriate third parties have agreed and to report on factual findings.

 

The auditor simply provides a report of the factual findings of agreed upon procedures, no assurance is expressed by him in his report. The report is restricted to those parties that have agreed to the procedures to be performed since others, unaware of the reasons for the procedures, may misinterpret the result.

 

4.            GENERAL PRINCIPLES OF AN AGREED UPON PROCEDURES ENGAGEMENT – The auditor should comply with the Code of Ethics, issued by ICAI. The ethical principles are –

(a)  Integrity

(b)  Objectivity;

(c)  Professional competence and the care;

(d)  Confidentiality

(e)  Professional conduct; and

(f)    Technical Standards.

When the auditor is not independent, a statement to that effect should be made in the report of factual findings.

 

The auditor should conduct an agreed upon procedure engagement in accordance with this AAS and the terms of the engagement.

 

5.            DEFINING THE TERMS OF THE ENGAGEMENT – There should be a clear understanding among the auditor, the client and other specified parties, who will receive copies of the report of factual findings regarding the agreed procedures and the conditions of the engagement. The nature to be agreed include the following:

(a)  Nature of the engagement

(b)  Stated purpose for the engagement

(c)  Identification of the financial information to which he agreed upon procedures will be applied.

(d)  Nature, timing and extent of the specific procedures to be applied.

(e)  Limitations on distribution of the report of factual findings. When such limitation would be in conflict with legal requirements, the auditor, would not accept the engagement.

The auditor should send an engagement letter documenting the key terms of the appointment. An engagement letter helps avoid misunderstanding regarding such matters as the objectives and scope of engagement, the extend of auditor’s responsibilities and the form of report to be issued.

6.            PLANNING AND DOCUMENTATION – The auditor should plant the work so that an effective engagement will be performed in providing evidence to support the report of factual findings, and evidence that the engagement was carried out in accordance with this AAS and the term of the engagement.

 

7.            PROCEDURES AND EVIDENCE – The auditor carry out the procedures agreed upon and use the evidence obtained as the basis for the report of factual findings. The procedures may includes –

(a)  Inquiry and analysis.

(b)  Recompilation, comparison and other clerical accuracy checks.

(c)  Observation

(d)  Inspection

(e)  Obtaining confirmations.

 

8.            REPORTING – The report needs to describe the purpose and agree upon procedures in details to extent of work performed. The report should also clearly mention that no audit ore review work has been performed. The report should certain –

(a)  Title

(b)  Addressee (ordinarily the appointing authority);

(c)  Identification of specific financial or non-financial information

(d)  A statement that the procedure performed were those agreed upon with the recipient;

(e)  A statement that the engagement was performed in accordance with this AAS.

(f)    Identification of the purpose for which the agreed upon procedures were performed;

(g)  A listing of the specific procedures performed.

(h)  A description of the auditor’s factual findings.

(i)    A statement that procedures performed do not constitute either an audit or a review, and, as such, no assurance in expressed.

(j)    A statement that had the auditor performed additional procedures, an audit or a review, other matters might have come to light that would have been reported;

(k)   A statement that the report is restricted to those parties that have agreed to the procedures to be performed.

(l)    A statement (when applicable) that the report relates only to the elements, accounts, items or financial or non-financial information specified and that it does not extent to the entity’s financial statement taken as a whole;

(m) Date of the report;

(n)  Place of signature;

(o)  Auditor signature – The report should be signed by the auditor in his personal name. When a firm is appointed the report signed in the personal name of the auditor and the firm. The membership number assigned by ICAI should also be mentioned.


Published by

Rahul Bansal
(Finalist)
Category Students   Report

1 Likes   6844 Views

Comments


Related Articles


Loading