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Prospective Financial Information Agreed-Upon Procedures Engagements

Prospective financial information is either a financial forecast or a financial projection. A financial forecast is prospective financial statements that present an entity’s expected financial position, results of operations, and cash flows based on the responsible party’s assumptions of conditions expected to exist and the entity’s planned course of action. A financial projection is prospective financial statements that present an entity’s expected financial position, results of operations, and cash flows based on the responsible party’s assumptions of conditions expected to exist and the entity’s planned course of action given one or more hypothetical assumptions. In other words, a forecast is what the responsible party thinks is going to happen and a projection represents a “what if” analysis.

What is an Agreed-Upon Procedures Engagement?

In an agreed-upon procedures engagement, the practitioner is engaged to perform specific procedures and report the resulting findings. Those engagements are governed by the attestation standards (AT-C 305). SSAE 19, Agreed-Upon Procedures Engagements, was issued in 2019 and became effective for reports dated on or after July 15, 2021. SSAE 19 superseded the previous AT-C 215 and amended portions of AT-C 105. In addition, in July 2021, the AICPA released conforming changes to the subject matter sections of the attestation standards such as AT-C 305 to reflect the requirements of SSAE 19.

The flexibility of an agreed-upon procedure engagement allows it to be customized to meet the needs of the user. There could be only extensive procedures related to a specific assumption such as forecasted sales or limited procedures to a wide range of assumptions such as testing the mathematical accuracy of a projection. Such engagements may be used to support loan applications or business sales or acquisitions or meet a variety of other user needs.

What’s changed for Agreed-Upon Procedures Engagements?

SSAE 19 removed the previous requirement that the practitioner request a written assertion or disclose in the practitioner’s report when an assertion was not obtained. It also permits the issuance of a general-use agreed-upon procedures report and no longer requires specified parties to determine the procedures to be performed and to assume responsibility for the sufficiency of the procedures. The procedures can be developed by the practitioner, the engaging party, intended users of the practitioner's report, or a combination of these parties, and the procedures can be developed over the course of the engagement. Prior to the issuance of the practitioner's report, the engaging party is required to agree to the procedures and acknowledge that the procedures performed are appropriate to meet the engagement's intended purpose. As a result of SSAE 19 and the conforming changes to AT-C 305 released in July 2021, the requirements and wording of the engagement letter, representation letter, and the practitioner’s agreed-upon procedures report have changed.

PPC’s Guide to Forecasts and Projections

PPC’s Guide to Forecasts and Projections simplifies the complex rules that apply to engagements involving prospective financial information and provides you with comprehensive engagement, procedure, and reporting checklists to ensure you can efficiently and effectively perform your forecast or projection engagements.

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