—Guide
Agreed-upon Procedures Engagements Explained: What an AUP Report Is and Isn't
What an agreed-upon procedures engagement is, how it differs from an audit, when it's the right tool, and how the procedures and report are agreed.
Sometimes a business needs independent comfort on something specific — a royalty calculation, a sample of transactions, a single schedule — without a full audit. An agreed-upon procedures engagement, or AUP, is often the right tool. This guide explains what it is, and what it isn't.
What an AUP Engagement Is
In an AUP engagement, a Chartered Accountant performs specific procedures that have been agreed in advance with the engaging party, and reports the factual findings. In India, it's governed by the ICAI's Standard on Related Services 4400.
For example, procedures might include:
- Agreeing a sample of sales invoices to the ledger and bank receipts.
- Recalculating a royalty or commission based on reported sales.
- Checking that payments were approved according to a stated policy.
- Comparing figures in a schedule with the accounting records.
What an AUP Report Isn't
- It isn't an audit, and it gives no opinion or assurance.
- It doesn't say whether the information is 'true and fair' or 'correct.'
- It reports only what was found from the agreed procedures. Users draw their own conclusions.
When AUP Is the Right Tool
- A foreign parent needs specific checks on an Indian subsidiary.
- A franchisor or licensor wants reported sales or royalties verified.
- A lender or investor wants specific covenants or data checked.
- A funder wants particular grant expenditure tested.
How the Procedures Are Agreed
The procedures, sample sizes and reporting format are agreed before work starts and set out in an engagement letter. They should be specific enough to produce factual findings — 'check that invoices are supported by delivery notes' rather than 'check that sales are accurate.'
Who Can Use the Report
Because users need to understand the procedures to interpret the findings, AUP reports are usually restricted to the parties that agreed the procedures.
Getting Help
Think Filing performs AUP engagements for Indian companies, subsidiaries of foreign groups, franchisees and grant recipients.