Should a CPA perform an AUP or a Consulting engagement? Here's a look at the two options and how they compare to one another.

1. MCNAIR, MCLEMORE, MIDDLEBROOKS & CO., LLC
CHARLES HALL
CHALL@MMMCPA.COM
478-330-5248
Agreed Upon Procedures
and Consulting Engagements

2. What Type of Service?

3. Scenario
Client needs fraud report,
thinks someone is stealing
cash

4. Scenario
Client wants a comfort letter
for a mortgage loan

5. Scenario
Client needs a personal
financial statement for bank
loan

6. Scenario
Client wants you to test
inventory but nothing else

7. Scenario
Client wants to issue an
internal control report to a
nonprofit board

8. Scenario
The leadership of a church
wants you to review how they
collect and deposit funds each
week

9. Engagement Letters are
Important!

10. At a minimum, a write a
memo describing what
you have been asked
to do.

11. Consider sending an email:
"George, just to be clear, you
have asked me to..."

12. Deciding Which
Service to Provide

13. Will Third Parties Place
Reliance on Your Work?
Are you adding credibility?

14. If Yes,
Use AUP Option

15. If No,
Use Consulting Option

16. Agreed Upon Procedures
 Required wording in AUP report
 Follow attestation standards
 Tighter procedural requirements
 Less legal liability
 Usually at least three parties

17. Consulting
 No particular wording
 Follow consulting standards
 More flexibility
 Usually just two parties

18. Agreed Upon Procedures
Engagements

19. Agreed Upon Procedures
Subject to Peer Review

20. Agreed Upon Procedures
If specified party asks for
procedures that are not well
defined, consider whether or not
you should accept the
engagement.

21. AUP Engagement
 Engagement letter not required
by AT standards but
recommended.
 Consider attaching your
procedures to the engagement
letter.

22. AUP Planning
 Get agreement from all parties.
 Consider drafting your report first
and providing it to all parties.

23. AUP Procedures
 Be specific.
 Can procedure be reperformed?
 Make sure procedures satisfy
third party.

24. AUP Language
 Responsible party - Person(s)
assuming responsibility for the
subject matter
 Specified parties - Persons
(entities) that assume
responsibility for the sufficiency of
the procedures

25. Poor AUP Examples
 Read the minutes
 Review invoices
 Interview the accounts payable
clerk

26. Reperform with Same Result?
If another person can perform
the same procedure and get the
same result, then you have a
good procedure.

27. Poor AUP Example
Reading the minutes
 What is your objective?
 Can another person
perform the procedure
and come to the same
conclusion?

28. Good AUP Example
 Agree every 25th check (from check
register) to an invoice agreeing amount,
payee and date.
 Can another person perform the
procedure and come to the same
conclusion?

29. General procedures (e.g.,
Reading Minutes) expose a
CPA to potential legal
liability.

30. Minutes may touch on a fraud-
related issue
that you are unaware of.

31. The Third party may want you
to assume more
responsibility.

32. Assuming more responsibility is
fine, but make sure procedures are
well defined.

33. AUP Report
 Procedure
 Finding
 Procedure
 Finding

34. AUP Report
Too often AUP reports only reflect
the procedure, but no finding.

35. AUP Planning
If you provide a draft, mark
it "Draft" and include
language explaining:
Results will depend on procedures.
No additional procedures will be
performed unless directed to do so.

36. Consulting Services

37. Consulting
Not subject to
peer review

38. Consulting standards list six
categories of services.

39. Consulting Services
 Consultations - e.g., reviewing a
business plan
 Advisory services - e.g.,
assistance with strategic
planning
 Implementation services - e.g.,
assistance with a merger

40. Consulting Services
 Transaction services - e.g.,
litigation services
 Staff and other support services -
e.g., controllership services
 Product services - e.g., providing
training services

41. Consulting Examples
 Fraud investigation
 Internal control review
 Bankruptcy work
 Divorce settlement
 Controllership work

42. Consulting Characteristics
 Generally nonrecurring
 Specialized knowledge and skills to
provide the service
 More interaction with the client and
can be broader than attest work
 Generally done just for the client

43. Consulting - Engagement Letter
If the nonattest service is for an
attest client, Interpretation 101-3
of Rule 101 of the Code of
Professional Conduct requires
documentation of the
understanding with the client.

44. Consulting - Engagement Letter
The understanding can be in:
1. An engagement letter or
2.A memo

45. Consulting - Engagement Letter
 If the CPA is providing only nonattest
services (e.g., consulting), then there
is no professional standards
requirement to have an engagement
letter.
 Do so anyway - the written
understanding will protect you.

46. Consulting - Workpapers
 Consulting standards do not require
the consultant to prepare
Workpapers.
 But, you should in most cases,
prepare Workpapers.
 Workpapers are the link between
your work and your report.

47. Consulting - Reports
 Report format and content are up
to you and your client
 There is no opinion or other
attestation reporting (e.g.,
compilation report or AUP report)

48. Consulting
If no formal report (e.g., phone
call where you discuss issues),
consider a memo to the file to
summarize your consultation.

49. Thanks for Your Attention!
We have two relevant Checkpoint
Guides:
Nontraditional Engagements
Small Business Consulting
Engagements