Tuesday, March 17, 2009

Auditor Agreed Upon Procedures

What are agreed upon procedures?

In accounting terms "agreed upon procedures" are used when a business client uses an external accounting auditor to perform specific tests and procedures and then report on the results to the client.

Examples of agreed upon procedures include special reviews of a loan portfolio, internal control systems, or capital budgeting analysis. In performing "agreed-upon procedures", the external auditor provides no opinion or assurance that the assertions being made by the company in the financial statements are free from material misstatement.  In fact, the could be wrong but that would implicate auditor ethics.

In conclusion, the users of the financial reports based on agreed-upon procedures must draw their own conclusions on the results of the tests reported and cannot rely on what the auditor discovers.

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