Louisiana Governmental Audit Guide

For CPA Firms

Agreed-Upon Procedures And Examination Engagements (400-1110)


DISCLAIMER
The Louisiana Governmental Audit Guide (LAGAG) is authorized by Louisiana Revised Statute 24:513 A. (5) (a) (i) to set forth the standards by which the engagements of local governments and quasi-public organizations (local auditees) are to be performed. The LAGAG is jointly produced by the Louisiana Legislative Auditor (LLA) and the Society of Louisiana Certified Public Accountants.

Although the LAGAG is intended to assist CPAs in performing their audits and other engagements for local auditees, it does not include a detailed analysis of the professional auditing and accounting standards a CPA must consider during his or her audit, review/attestation or compilation engagements; nor is it a substitute for professional judgment. CPAs must reach their own conclusions through research of all applicable auditing and accounting standards, in addition to the LAGAG, in the performance of their local auditee engagements.

In addition, although the LAGAG is intended to assist local auditees, it does not include all of the legal and accounting information an agency needs to perform its operations; nor is it a substitute for professional, legal or accounting advice; or professional or personal judgment. Local auditees should use the information in the LAGAG, in conjunction with the guidance of the professionals most familiar with the particular facts and circumstances regarding their agency, in the performance of their operations.

For questions and comments about the LAGAG, please contact LLA at (225) 339-3800.


The audit, review/attestation, and compilation reports that local auditees LLA LaGAG are required to submit to the Louisiana Legislative Auditor (LLA) by the audit law LLA LaGAG (Louisiana Revised Statute 24:513) provide a great deal of information to local auditees and the users of their financial statements.

However, an audit, review/attestation, or compilation report may not meet the needs of all users of local auditee reports, who may require additional information and assurances on internal control, compliance with laws and regulations, or other matters.

The local auditee may hire a certified public accounting (CPA) firm to perform additional tests of controls and compliance or other matters to supplement the financial statement audit’s or other engagement’s coverage of these areas; in order to meet the local auditee’s needs, or the needs of other report users.

These additional needs are often met by the following:
· An agreed-upon procedures engagement
· An examination engagement


An agreed-upon procedures engagement is performed by a CPA firm in accordance with Standards for Attestation Engagements promulgated by the American Institute of Certified Public Accountants. As the name suggests, this type of engagement consists of a CPA performing procedures that are agreed to by the local auditee and the CPA firm. The list of procedures to be performed is included in the engagement agreement that is signed by the local auditee and the CPA firm. After the engagement is completed, the CPA prepares a report on the results of the procedures performed, and any exceptions noted.

An examination engagement is also performed by a CPA in accordance with Standards for Attestation Engagements. In an examination engagement, the CPA obtains reasonable assurance about whether the subject matter of the engagement, as measured or evaluated against the criteria, is free from material misstatement; and expresses an opinion about whether the subject matter is in accordance with, or based on, the criteria; or whether management’s assertion is fairly stated, in all material respects.

Common subjects of agreed-upon procedures and examination engagements are the test of specific types of expenditures, such as travel and credit card expenditures; or certain types of accounts, such as school activity funds. These engagements may also be performed on the contents of a specific report or statement, such as a tax collector’s statement of taxes assessed and settlements made to parish taxing authorities.

Most agreed-upon procedures and examination engagements (except for statewide agreed-upon procedures engagements LLA LaGAG) are classified as non-routine engagements LLA LaGAG. Non-routine agreed-upon procedures and examination engagements are approved by LLA through the Engagement Approval Request form. See Submitting an Engagement Approval Request to the Legislative Auditor LLA LaGAGfor more information on this process.

QUESTIONS:

Q. How do agreed-upon procedures and examination engagements differ from audit engagements?
A. The principal difference between an audit engagement, and an agreed-upon procedures or examination engagement is the type of standards under which the engagements are performed. Audits are performed under auditing standards promulgated by the AICPA; agreed-upon procedures and examination engagements are performed under attestation standards promulgated by the AICPA.

Q. The comptroller for a local auditee would like to engage our CPA firm to perform an agreed-upon procedures engagement to test 100% of their expenditures. Is this advisable?
A. If fraud is suspected, an engagement to test 100% of expenditures may be in order. Absent a suspicion of fraud, such an engagement may cost a local auditee far more than the value of any knowledge that would be gained. It would cost less money, and would most likely be as effective, for the local auditee to identify the specific areas of concern – such as whether documentation for travel or credit card reimbursements is adequate – and hire your firm to perform an agreed-upon procedures engagement regarding these transactions.

Q. Must an agreed-upon procedures engagement or examination engagement be performed by the CPA firm that performed the audit?
A. An agreed-upon procedures engagement or examination engagement needs to be performed by a CPA firm on LLA’s approved list, but does not need to be performed by the same CPA that performed the local auditee’s audit, review/attestation, or compilation engagement. The exception is the statewide agreed-upon procedures engagement LLA LaGAG LLA requires of all local auditees that are required by the audit law to provide an audit report to LLA.


NB: This document is the current version as of 09/20/2021.