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Documentation is the key to business expense deductions
If you have incomplete or missing records and get audited by the IRS, your business will likely lose out on valuable deductions. Here are two recent...
Your CPA offers a wide menu of services. An audit is a familiar type of attestation service that provides a formal opinion about whether the company’s financial statements conform to U.S. Generally Accepted Accounting Principles (GAAP).
Consulting services, in contrast, provide advice or technical assistance that’s only for internal purposes. That is, lenders and other third parties can’t rely on the findings, conclusions and recommendations presented during a consulting project.
If you need a report that falls somewhere between these alternatives, consider an agreed upon procedures (AUP) engagement.
Scope
An AUP engagement uses procedures similar to an audit, but on a limited scale. It can be used to identify specific problems that require immediate action. When performing an AUP engagement, your CPA makes no formal opinion; he or she simply acts as a fact finder. The report lists:
It’s the user’s responsibility to draw conclusions based on those findings. AUP engagements may target specific financial data (such as accounts payable, accounts receivable or related party transactions), nonfinancial information (such as a review of internal controls or compliance with royalty agreements), a specific financial statement (such as the income statement or balance sheet) or even a complete set of financial statements.
Advantages
AUP engagements boast several advantages. They can be performed at any time during the year, and they can be relied on by third parties. Plus, you have the flexibility to choose only those procedures you feel are necessary, so AUP engagements can be cost-effective.
Specifically, AUP engagements can be useful:
In addition, lenders or franchisors may request an AUP engagement if they have doubts or questions about a company’s financials or the effectiveness of its internal controls — or if they want to check on the progress of a distressed company’s turnaround plan.
Contact us
AUP engagements can be performed to supplement audits and consulting engagements — or as a standalone service. We can help you customize an AUP engagement that fits the needs of your business and its stakeholders.
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