CPA Exam — AUDForming Conclusions and ReportingHard
A practitioner is engaged to perform an agreed-upon procedures engagement related to a client's compliance with specific loan covenants. Which of the following statements about the report on an agreed-upon procedures engagement is correct?
- AThe report provides an opinion on the client's overall compliance with the loan covenants.
- BThe report provides a summary of findings based on the procedures performed.
- CThe report is designed to be distributed to a broad range of general users.
- DThe report provides reasonable assurance regarding the client's compliance.
Show answer & explanationAnswer & explanation
Correct answer: B. The report provides a summary of findings based on the procedures performed.
An agreed-upon procedures engagement does not provide an opinion or assurance. Instead, the practitioner performs specific procedures agreed upon by the engaging party (and often other specified parties) and reports only on the factual findings resulting from those procedures. Users then draw their own conclusions.
Why the other options are wrong
- A. An opinion is provided in an examination engagement, which offers reasonable assurance, not an agreed-upon procedures engagement.
- C. Agreed-upon procedures reports are restricted to the specified parties who agreed to the procedures, not for general distribution, as users outside those parties may misunderstand the findings without knowledge of the agreed procedures.
- D. Agreed-upon procedures engagements provide no assurance; reasonable assurance is provided in an examination.
Agreed-Upon Procedures Report
A report on an agreed-upon procedures engagement summarizes factual findings without expressing an opinion or any level of assurance, and its distribution is restricted to specified parties.
- No assurance provided
- Lists procedures and factual findings
- Report distribution is restricted
Memory trick: AGREED means NO OPINION, just FACTS for specific EYES.