Services related to Auditing
An audit consists of testing your accounting records and issuing a written opinion about the fairness of your financial statements and the adequacy of your footnote disclosures. A review is similar, but involves less testing.
Agreed-upon Procedures

Agreed-upon procedures apply to engagements relating to agreed-upon procedures to specified elements or accounts. Agreed-upon procedures are when the accountant is hired to issue a report of findings based on specified financial statement items. The users of the report agree upon the procedures to be conducted by the accountant that the user believes are suitable. The user takes responsibility for the adequacy of the procedures. In this engagement, the accountant does not express an opinion or negative assurance. Instead, the report should be in the form of procedures and findings. A representation letter is prepared that depends on the nature of the engagement and the specified users.

AGREED UPON PROCEDURES are used when a client retains an external auditor to perform specific tests and procedures and report on the results. Examples might include special reviews of loan portfolio or internal control systems. In performing agreed-upon procedures, the auditor provides no opinion, certification, or assurance that the assertions being made in the financial statements are free from material misstatement. The users of reports based on agreed-upon procedures must draw their own conclusions on the results of the tests reported. For example, an external auditor could be asked to look at a certain number of corporation loan files and document which of the required forms are in the files. The auditor would report on the selection and the results of the procedures performed but would not provide a formal opinion with conclusions drawn from the results of the procedures.
Agreed upon procedures refers to situations where an accountant is hired to create a report based on specific and particular items on the financial statement. For example, an accountant is hired by a local church to reconcile their accounts. This would not be a full audit, but only a reconciliation, and it would be considered an agreed upon procedures report or engagement.

• In this case, the church leaders would agree on the procedures the accountant uses to create the report, because they believe these procedures are the most suitable for the report, and the leaders would take responsibility for the adequacy of these procedures. The accountant does not give negative findings or express an opinion, but rather just reports procedures and conclusions.

• There are many benefits to an agreed-upon procedures engagement (AUP). Because it is not an audit, the company has the ability to decide what type and extent of procedures they want performed, which can cost must less than a full audit. The final report, because it does not express an opinion, is actually a very detailed accounting of the exact procedures the auditors used to create the report, which can result in better accounting practices at the company. For example, a company is worried about their payroll practices, so they hire an accountant to do an AUP analysis and report about their payroll department and its attention to detail.

• An AUP is helpful for companies who might have concerns about one financial aspect of their company, while they feel comfortable about most others, (such as the payroll example above). An entire audit isn't necessary, just attention to one area or department or another.

• Clearly, agreed upon procedures can vary widely due to the individual needs of the company. Since it is up to the company to set the criteria, they can choose a wide variety of records to study, or narrow the field considerably. The most important thing to recognize is that agreed upon procedures are just that, the company sets them and the auditor complies without making a judgment or opinion about the data.

The goal of a compilation is to take information that is on the general ledger and accumulate it into financial statements in the same format that would come out of a review or audit. The format may look the same, but the accountant performs much less work in a compilation than in a review or audit.

The accountant will perform an extremely limited analysis on any of the numbers presented. The accountant would only follow up on information that is obviously incorrect, such as obvious departures from GAAP. For example, if there are no depreciation expenses recorded when there should be, or if the amount of fixed assets is minimal even though there are substantial amounts of equipment in use, then the accountant would have to address the issue and make appropriate corrections.

There is an extreme limitation on how much reliance can be placed on a compilation because the accountant has not gained an understanding of internal controls, has not even discussed with the organization how it is managing its fraud risks, and has not performed testing of any numbers.

The key sentence of a compilation report from the accountant reads, “We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or any other form of assurance on them.” As a result, an external reader of the financial statements can place minimal reliance on a compilation report.

A compilation is used when an outside party, such as a lender, needs to see the financial information in a typical format (following GAAP presentation rules) instead of in whatever format the internal accounting system would produce. It is relatively rare for a small- or medium-sized nonprofit organization to obtain a compilation.

A compilation involves the lowest amount of work. As a result, the cost will be far lower than for a review or audit.

Compiled Financial Statements represent the most basic level of service CPAs provide with respect to financial statements. In a compilation, the CPA must comply with certain basic requirements of professional standards, such as having a knowledge of the client's industry and applicable accounting principles, having a clear understanding with the client as to the services to be provided, and reading the financial statements to determine whether there are any obvious departures from generally accepted accounting principles (or, in some cases, another comprehensive basis of accounting used by the entity). It may be necessary for the CPA to perform "other accounting services" - such as creating your general ledger, or assisting you with adjusting entries for your books - before the financial statements can be prepared. Upon completion, a report on the financial statements is issued that states a compilation was performed in accordance with AICPA professional standards, but no assurance is expressed that the statements are in conformity with generally accepted accounting principles. This is known as the expression of "no assurance." Compiled financial statements are often prepared for privately held entities that do not need a higher level of assurance expressed by the CPA. 
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