AICPA Issues SOP on Agreed-Upon Procedures

AICPA Issues SOP on Agreed-Upon Procedures

The AICPA has revised its Technical Questions and Answers (TQAs) under Section 6400, Health Care Entities, relating to provisions under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), specific to health care entities.

SOP 21-1: Performing Agreed-Upon Procedures

The AICPA has released Statement of Position (SOP) 21-1, Performing Agreed-Upon Procedures Related to Rated Exchange Act Asset-Backed Securities Third-Party Due Diligence Services as Defined by SEC Release No. 34-72936, under the authority of the Auditing Standards Board (ASB).

A Note accompanying SOP 21-1 indicates that the ASB’s Asset-Backed Securities Agreed-Upon Procedures Task Force developed the SOP to “provide guidance to practitioners regarding the application of Statements on Standards for Attestation Engagements (SSAEs) to agreed-upon procedures (AUP) attestation engagements related to third-party due diligence services performed in connection with rated asset-backed securities (ABS) issued in accordance with the Securities Exchange Act of 1934, as amended (Exchange Act), as those services are defined in the SEC rules as amended or adopted by SEC Release No. 34-72936, Nationally Recognized Statistical Rating Organizations, and the accompanying text” (the Release).

SOP 21-1 supersedes SOP 17-1, Performing Agreed-Upon Procedures Related to Rated Exchange Act Asset-Backed Securities Third-Party Due Diligence Services as Defined by SEC Release No. 34-72936, when applying SSAE No. 19, Agreed-Upon Procedures Engagements, in an agreed-upon procedures engagement that addresses rated Exchange Act asset-backed securities third-party due diligence services as defined by SEC Release No. 34-72936.

Agreed-Upon Procedures

In December 2019, the ASB issued Statement on Standards for Attestation Engagements No. 19 (SSAE 19), Agreed-Upon Procedures Engagements, which supersedes AT-C Section 215 of the same title in SSAE 18, Attestation Standards: Clarification and Recodification, and provides flexibility to practitioners performing agreed-upon procedures (AUP) engagements. SSAE 19 allows practitioners to perform AUP engagements in more situations than they have historically.

SSAE 19 is effective for agreed-upon procedures reports dated on or after July 15, 2021, with early implementation permitted.

Application of SOP 21-1

Practitioners frequently perform agreed-upon procedures engagements in relation to securitization transactions. These transactions, referred to as ABS, “are structured financings in which the cash flows and related risks (for example, credit, prepayment, and liquidity risk) of a pool of financial assets are redistributed by the issuance of new securities backed by the same financial asset or pool of financial assets.”

The SEC, in 2014, issued the Release relating to AUP engagements constituting third-party due diligence services. The effective date for these AUP engagements was June 15, 2015.

SOP 21-1 applies when a practitioner accepts an engagement to perform covered services in accordance with the AICPA’s attestation standards. For purposes of SOP 21-1, “covered services” include: procedures performed by the practitioner that are considered to be third-party due diligence services in accordance with the release. For example, comparing the information on a data file with the information contained in the hard-copy documents in a loan file is an activity that falls within the definition of due diligence services in the release.”

SOP 21-1 sets forth the requirements for included AUP engagements as well as reporting considerations. It also provides sample guidance, including an Illustrative Covered Services Report and an Illustrative Form ABS Due Diligence-15E.

Effective Date

The requirements of SOP 21-1 are effective for AUP reports dated on or after July 15, 2021, the same effective date as SSAE 19. Early implementation is permitted.

By CCH ARM Editorial 

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