When an Agreed-Upon Procedures Report Fits Better Than an Audit
Lenders and shareholders sometimes need factual testing of a narrow question—not a full opinion on the financial statements.
A statutory audit answers a broad question: do the financial statements present fairly, in all material respects? Agreed-upon procedures answer narrower ones—whether a covenant ratio was calculated from stated inputs, whether an earn-out schedule agrees to the sales ledger, or whether specified invoices were paid by a given date.
The engagement letter must list every procedure in language a non-accountant can follow. Ambiguity here creates disputes later. Both the company and the requesting party should sign off on the list before fieldwork begins.
The report that follows states what was done and what was found. It does not say the accounts are free from material misstatement. Readers who need that assurance still require an audit or a review.
Choose agreed procedures when the audience is defined, the question is specific, and the timeline is short. Choose an audit when regulators, statutes, or shareholders require an independent opinion on the statements as a whole.