Agreed Upon Procedures Letter Template for the United States
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What is a Agreed Upon Procedures Letter?
The Agreed Upon Procedures Letter serves as a formal engagement document in the United States, establishing the scope and nature of specific procedures that an independent accountant will perform. Unlike an audit or review, this engagement is designed to report only on factual findings without providing assurance or an opinion. The letter must comply with AICPA standards, particularly SSAE No. 19, and clearly defines the responsibilities of all parties involved. It's commonly used when parties need specific procedures performed on financial or non-financial subject matters, rather than a full audit.
Frequently Asked Questions
Is an Agreed Upon Procedures Letter legally binding in the United States?
Yes, an Agreed Upon Procedures Letter is legally binding in the United States once signed by all parties. It creates contractual obligations between the independent accountant and engaging parties under U.S. contract law. The document must comply with AICPA SSAE No. 19 and AT-C Section 215 to be professionally enforceable.
Can I be held liable if my Agreed Upon Procedures Letter is missing key requirements?
Yes, incomplete or non-compliant AUP letters can expose you to professional liability and potential litigation. Under AT-C Section 215, the letter must clearly define procedures, responsibilities, and limitations. Missing elements like scope limitations or distribution restrictions can lead to misunderstandings and legal disputes.
How does an Agreed Upon Procedures Letter differ from an audit engagement letter?
An AUP letter establishes a non-assurance engagement where the accountant performs specific procedures without expressing an opinion, while an audit engagement letter sets up an assurance engagement requiring the auditor to express an opinion on financial statements. AUP engagements have more limited scope and different reporting requirements under AICPA standards.
How long does it typically take to prepare an Agreed Upon Procedures Letter?
A standard AUP letter typically takes 2-5 business days to prepare, depending on the complexity of procedures and number of parties involved. Simple procedures may be documented in 1-2 days, while complex multi-party engagements can take up to a week. The timeline includes drafting, internal review, and client negotiations.
Must an Agreed Upon Procedures Letter include specific language required by AICPA standards?
Yes, AT-C Section 215 requires specific language regarding the nature and limitations of AUP engagements. The letter must state that procedures are insufficient to constitute an audit or review, that no opinion or assurance is provided, and include appropriate distribution limitations. Failure to include required language can invalidate the engagement.
Can I modify procedures after signing an Agreed Upon Procedures Letter?
Procedures can be modified only through a written amendment signed by all parties to the original engagement letter. Under AICPA standards, any changes must be documented and agreed upon before implementation. Significant modifications may require a new engagement letter to ensure compliance with professional standards.
Why do Agreed Upon Procedures Letters fail to protect accountants from liability?
Common failures include vague procedure descriptions, inadequate scope limitations, missing distribution restrictions, and unclear responsibility allocations between parties. Many letters also fail to properly disclaim assurance or opinion-giving, which can create unintended professional liability. Proper drafting under AT-C Section 215 requirements is essential for liability protection.
About the Agreed Upon Procedures Letter
An Agreed Upon Procedures Letter is a critical engagement document that formalizes the relationship between you and an independent accountant for performing specific, pre-determined procedures. Unlike audits or reviews that provide assurance opinions, this engagement focuses solely on factual findings and observations based on procedures you and the accountant mutually agree upon.
When do you need this document?
You'll need an Agreed Upon Procedures Letter when your organization requires an independent accountant to perform specific procedures on financial or operational data without needing a full audit opinion. This commonly occurs during due diligence processes, regulatory compliance checks, grant reporting requirements, or when investigating specific accounting matters. Many organizations use these engagements for cost-effective verification of particular transactions, account balances, or operational procedures where a complete audit would be unnecessary or too expensive.
Key legal considerations
The engagement letter must clearly define the scope and nature of procedures to be performed, ensuring all parties understand the limitations of the engagement. You should specify that no assurance opinion will be provided and that the results are intended solely for specified parties' use. The letter must establish clear communication protocols, define the subject matter being examined, and outline reporting requirements. Additionally, you need to address confidentiality provisions, professional liability limitations, and the accountant's independence requirements. The document should also clarify that the engagement cannot be relied upon to disclose errors, fraud, or illegal acts, unless specifically designed to do so.
Legal requirements in United States
Under United States law, Agreed Upon Procedures engagements must comply with AICPA Statement on Standards for Attestation Engagements (SSAE) No. 19 and AT-C Section 215. These standards require that you and the accountant agree on specific procedures before the engagement begins, and that the accountant maintains independence throughout the process. If your organization is publicly traded, additional Sarbanes-Oxley Act requirements may apply, particularly regarding internal control procedures. State accountancy laws also govern the accountant's professional conduct and licensing requirements. The engagement letter must clearly state that the procedures performed will not constitute an audit or review under generally accepted auditing standards, and that no opinion or assurance will be provided on the subject matter examined.
GOVERNING LAW
Applicable law
This Agreed Upon Procedures Letter is drafted to comply with United States law. Key legislation includes:
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