When a client asks a Chartered Accountant to “verify these numbers”, an audit is not always the right engagement. Sometimes the users do not need an opinion on financial statements; they need a practitioner to perform a precisely defined set of checks and report exactly what was found. That is the core use case for an agreed-upon procedures engagement under SRS 4400.
ICAI’s current Engagement and Quality Control Standards index classifies SRS 4400 under Standards on Related Services, separately from Standards on Auditing and Standards on Review Engagements. The official SRS 4400 text describes an engagement in which specified procedures are performed on specified information and the practitioner reports factual findings.
What an SRS 4400 engagement actually does
The objective is straightforward: the practitioner carries out procedures of an audit nature that have been agreed with the entity and, where appropriate, specified third parties, and then reports the factual findings.
This distinction is critical because no assurance is expressed in an agreed-upon procedures report. It does not state that the information is fairly stated or free from material misstatement. It says, in substance, “these were the procedures performed, and these were the results and exceptions found.”
SRS 4400 is directed primarily at financial information. ICAI gives examples involving accounts payable, accounts receivable, related-party purchases, segment sales and profits, individual financial statements or even a complete set of financial statements. The standard also notes that its guidance may be useful for non-financial information where the practitioner has adequate knowledge of the subject matter and reasonable criteria exist.
AUP vs audit vs review: what is the real difference?
- Audit: use an audit when the intended users need an audit opinion under the Standards on Auditing on financial statements or another audit subject matter within the applicable framework. The auditor determines and performs procedures necessary to obtain the required audit evidence rather than merely executing a fixed list supplied by users.
- Review: use a review when the engagement is intended to be performed under the Standards on Review Engagements and the required deliverable is a review conclusion. ICAI separately classifies SREs from SRSs.
- Agreed-upon procedures: use an AUP engagement when specified users need specified factual checks. The procedures, subject matter, purpose and reporting boundaries are agreed in advance, and the practitioner reports findings without giving assurance.
A useful decision test is: Do the users want a professional conclusion, or do they want verified facts from a defined procedure list? If they need a conclusion or opinion, AUP is usually the wrong structure. If they already know what checks matter and want transparent factual results, SRS 4400 may fit much better.
When agreed-upon procedures are a good fit
An AUP engagement works best when the question can be converted into objective procedures that another knowledgeable reader can understand. Examples include:
- comparing specified receivable balances with the trial balance and customer confirmations;
- recomputing a defined incentive, royalty or rebate schedule using agreed inputs;
- inspecting supporting documents for a specified list of expenditure items;
- comparing a defined data set with underlying invoices, contracts or ledger entries;
- checking clerical accuracy, recomputations or reconciliations for identified accounts; and
- obtaining confirmations for an agreed population or agreed selection of items.
SRS 4400 itself lists procedures such as inquiry and analysis, recomputation, comparison and clerical accuracy checks, observation, inspection and obtaining confirmations.
When AUP is the wrong tool
- The user expects the CA to certify that an entire balance, process or financial statement is “correct” without defining measurable procedures.
- The intended users need an audit opinion, review conclusion or another form of assurance.
- The scope is vague, such as “check all major irregularities”, leaving the practitioner to decide what work would be sufficient while the report is still described as AUP.
- The report is expected to support users who did not understand or agree to the procedures and may interpret the factual findings as an assurance conclusion.
ICAI’s standard generally contemplates restricting the report to parties that agreed to the procedures because other readers may not understand why those particular procedures were selected.
How to design an AUP engagement properly
- Define the purpose. Start with the decision the users are trying to make. “Check receivables” is too broad; “compare the 25 specified customer balances at 31 March with confirmations and report differences” is much clearer.
- Identify the exact information. State the account, schedule, period, population, documents or data to which the procedures will apply.
- Write procedures that produce factual answers. Use verbs such as compare, inspect, recompute, confirm, observe and list. Avoid wording that silently asks the practitioner to form an assurance conclusion.
- Agree nature, timing and extent. SRS 4400 requires a clear understanding of the specific procedures and engagement conditions. The engagement letter should document the agreed procedures and important terms.
- Perform and document the work. The practitioner should retain documentation supporting the factual findings and showing that the engagement was performed in accordance with SRS 4400 and the agreed terms.
- Report findings, including exceptions. The report should describe the purpose, procedures and factual results in enough detail for readers to understand the work. It should clearly state that no audit or review was performed and no assurance is expressed.
Worked example: receivables verification without an audit opinion
Assume a lender wants factual checks over 25 customer balances selected in advance from a borrower’s year-end receivables. The agreed procedures could require the CA to compare those balances with the receivables trial balance, obtain customer statements or confirmations, compare responses with the recorded amounts, and inspect specified reconciliation items where differences arise.
Suppose 21 balances agree, three contain timing differences supported by identified reconciling items, and one confirmation differs by ₹2,40,000 without a supporting reconciliation at the reporting date. An AUP report would describe those results and the exception. It would not convert them into a conclusion such as “the receivables balance is fairly stated” unless a different assurance engagement had been accepted and performed.
The users therefore receive transparent evidence on the agreed matters without confusing narrow checks with an audit of the whole balance or financial statements.
Common mistakes in SRS 4400 engagements
- using words such as “certify”, “assure” or “true and correct” when the engagement is meant to report factual findings only;
- agreeing a broad objective but failing to document the exact procedures, population, timing and extent;
- describing findings vaguely instead of identifying errors and exceptions with enough detail;
- adding procedures during the assignment without appropriately agreeing the changed scope;
- allowing the report to imply that procedures constituted an audit or review; and
- failing to define who may use the report and for what purpose.
Practical takeaway
SRS 4400 is not a lighter audit. It is a different professional service built around precision rather than assurance. Use it when identified users can specify the checks they need and are prepared to interpret the factual findings themselves. A strong AUP engagement begins with an exact purpose, converts that purpose into objective procedures, documents the agreed scope, reports every material factual result and exception clearly, and never suggests an audit or review conclusion that was not performed.
