What is Attestation and How Does It Relate to Audits, Reviews, and Agreed-Upon Procedures?

In the world of financial reporting, business owners often hear terms like attestation, audits, compilations, reviews, examinations and agreed-upon procedures (AUPs). But what do they really mean? Understanding these services is crucial for promoting financial transparency, meeting compliance requirements, and building trust with stakeholders.

This article explains what attestation services are, how they differ from financial statement audits, and when businesses should consider attestation services other than financial statement audits.

What is Attestation?

Attestation is the process in which a Certified Public Accountant (CPA) engages with a business to provide an opinion, assurance or the results from procedures they perform over subject matter, which can include financial statements.

Attestation engagements can vary in scope and complexity, with audits, compilations, reviews, and agreed-upon procedures being the most common types. These services help businesses provide transparency and meet compliance requirements set by investors, lenders, and regulatory agencies.

Attestation vs. Audit: What’s the Difference?

All audits are attestation engagements, but not all attestation engagements are audits. Audits provide the highest level of assurance, while other attestation services, like compilations, reviews and AUPs, provide either lower levels of assurance or the results of procedures performed.

Comparison of Attestation Services

● Audit: Provides the highest level of assurance through an opinion that financial statements are fairly presented in accordance with accounting standards. Audits include a risk assessment, an assessment of internal control, and rigorous testing of material accounts and estimates. Audits are required for publicly traded companies and are often required by sophisticated investors, lenders or regulatory agencies.

● Review: Offers limited assurance that financial statements are fairly presented in accordance with accounting standards. Reviews consist of inquiries and analytical

procedures but not the in-depth testing required in an audit. Reviews are often suitable for private companies applying for loans or when the level of rigor required in an audit is not considered necessary by investors or regulatory agencies.

● Compilations: Do not offer assurance, but rather present financial statements in accordance with a framework of accounting. Compilations are often suitable for small businesses when lenders, investors or regulatory agencies assess the level of risks of material financial statement misstatement to be low.

● Agreed-Upon Procedures (AUPs): Provides no assurance, only factual findings. A CPA performs specific procedures as agreed-upon by the business. AUPs are often best for targeted financial verification, such as due diligence engagements or compliance checks.

● Examinations: CPA’s provide an opinion on whether subject matter materially complies with the relevant criteria. Subject matter can include financial or operational information, and examinations are often useful when dealing with operational data or special purpose financial statements.

Breaking Down Audits, Reviews, and Agreed-Upon Procedures

Audits – The Highest Level of Assurance

A financial statement audit is the most in-depth attestation service. It involves a CPA assessing a company’s risks and internal control structure, analyzing estimates and assumptions, testing accounts and internal controls, and ensuring compliance with accounting standards. Audits provide credibility to financial statements and enable lenders, investors, regulators or other stakeholders to rely on the accuracy and completeness of the financial statements.

Reviews – A Cost-Effective Alternative to Audits

A financial statement review provides limited assurance, meaning a CPA performs inquires and analytical procedures but does not conduct the extensive testing required in an audit. Reviews are often useful for private companies that do not require a full audit but still want a professional evaluation of their financial data. Because of the limited scope when compared to an audit, reviews require significantly less time and expense while still being subject to the work of an independent CPA.

Agreed-Upon Procedures – A Flexible Approach

Unlike audits and reviews, agreed-upon procedures engagements are highly customized and can focus on financial, operational or compliance subject matter. A business and a CPA agree on specific scope areas, such as revenue verification, compliance with contracts, or confirming assertions being made by a third party. The CPA then reports factual findings without providing an overall opinion.

AUPs are useful for businesses preparing for acquisitions, verifying financial data for legal cases, or ensuring compliance with contractual obligations.

Why Attestation Services Matter for Businesses

Attestation services play a crucial role in strengthening a business’s financial credibility and operational stability. Whether a company is seeking investment, applying for loans, or reporting accurate financials, these services offer several benefits:

● Increased Trust: Investors, lenders, and stakeholders rely on attested financial statements to make decisions.

● Risk Mitigation: Audits and reviews help identify potential financial risks before they become major problems.

● Regulatory Compliance: Many industries require independent attestation to meet legal and financial reporting standards.

● Better Decision-Making: Clear, verified financial data allows business owners to make informed strategic decisions.

How DK Partners Can Help

At DK Partners, we specialize in attestation services designed to meet the unique needs of businesses in Austin, TX. Whether your company requires an audit, examination, compilation, review, or an agreed-upon procedures engagement, our experienced CPAs can provide valuable guidance and perform the requested services.