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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Reporting on other assignments

Brightwell LLP is asked to perform an agreed-upon procedures engagement for Sorrel Co. Sorrel's finance director proposes that the procedures be described as 'review the adequacy of inventory controls and report on whether they are satisfactory'. What is the most appropriate response by the practitioner?

The practitioner should decline the wording. Agreed procedures must be clear, objective and capable of producing factual findings. Phrases such as 'adequacy' or 'satisfactory' require subjective judgement and can be interpreted differently, so they are unsuitable for an agreed-upon procedures engagement under ISRS 4400 (Revised).

  1. AAccept the wording, as the practitioner can judge adequacy using professional judgement
  2. BDecline the wording because procedures must be described in terms that are clear, objective and not open to varying interpretation, and findings must be factualCorrect
  3. CAccept the wording provided the report includes a negative assurance statement
  4. DAccept the wording provided the engagement is reclassified as an audit of the financial statements

Explanation

ISRS 4400 (Revised) requires procedures to be described objectively and the findings to be factual. Terms like 'adequacy' or 'satisfactory' call for subjective judgement and invite differing interpretations. Adding negative assurance does not fix this, because AUP reports contain none.

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