Page 180 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
Independence Not a Requirement: Independence is not a requirement for agreed-upon procedures
engagement. However, the terms or objective of the engagement may require the auditor to comply with the
independence requirements of the Code of Ethics.
Statement on Lack of Independence: Where the auditor is not independent, a statement to that effect should
be made in the report of factual findings.

(CNO SRS 4400.060)Step 1: Defining the Terms of the Engagement
Understanding regarding agreed procedures: The auditor should ensure with representatives of the entity and,
ordinarily, other specified parties who will receive copies of the report of factual findings, that there is a clear
understanding regarding the agreed procedures.
Conditions of the Engagement: The auditor should also ensure that there is a clear understanding regarding
the conditions of the engagement.
Matters to be agreed include the following: -
Nature of the Engagement: Matters to be agreed include the nature of the engagement, including the fact that
the procedures performed will not constitute an audit or a review and that accordingly no assurance will be
expressed.
Purpose for the Engagement: The stated purpose for the engagement is also a matter to be agreed upon.
Identification of Financial Information: Identification of the financial information to which the agreed-upon
procedures will be applied is another matter to be agreed.
Specific Procedures to be Applied: The nature, timing, and extent of the specific procedures to be applied are
also matters to be agreed upon.
Limitations on Distribution of the Report: Limitations on the distribution of the report of factual findings
need to be agreed upon. When such limitation would be in conflict with legal requirements, the auditor would
not accept the engagement.
Sending an Engagement Letter & Matters to be included
1A. Sending an Engagement Letter: It is in the interests of both the client and the auditor that the auditor sends
an engagement letter documenting the key terms of the appointment. An engagement letter confirms the
auditor’s acceptance of the appointment.
1B. Avoiding Misunderstanding: The engagement letter helps avoid misunderstanding regarding such matters
as the objectives and scope of the engagement, the extent of the auditor’s responsibilities, and the form of reports
to be issued.
2A. Listing of procedures: Matters that would be included in the engagement letter include a listing of the
procedures to be performed as agreed-upon between the parties.
2B. Restriction on Report Distribution: The engagement letter would also include a statement that the
distribution of the report of factual findings would be restricted to the specified parties who have agreed to the
procedures to be performed.

(CNO SRS 4400.080) Planning
The auditor should plan the work so that an effective engagement will be performed.
Procedures and Evidence
The auditor should carry out the procedures agreed-upon and use the evidence obtained as the basis for the report
of factual findings.
The procedures applied in an engagement to perform agreed-upon procedures may include (Same as methods of
collecting Audit Evidence, Except Reperformance & Analytical Procedures):
• Inquiry and analysis
• Re computation, comparison and other clerical accuracy checks
• Observation

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