In the current business environment that is fast-paced, compliance with regulations has grown more complex and demanding than it ever was before. With ever-changing laws, industry standards as well as local laws, companies must keep in line. If they do not, then they risk severe penalties, legal complexities and negative publicity. This is where Agreed-Upon procedures (AUPs) are a must, offering specific, cost-effective and efficient options for companies that have to navigate the complexities of ensuring compliance with the rules and regulations.
What is it that makes AUPs an effective tool for businesses that have to deal with compliance concerns? Let’s look at it in detail.
What Are Agreed-Upon Procedures (AUPs)?
Before we dive into the reasons why AUPs are beneficial to compliance with regulations, let’s first explain the nature of what they’re. An Agreed-Upon Procedures is a service where an uninvolved third party such as CPA firms executes specific procedures with respect to the financials or operations approved by the company and other stakeholders. Contrary to full audits or reviews, AUPs don’t provide an opinion regarding the financial statements. Instead they provide specific results using predefined procedures.
For companies that face compliance issues, AUPs can be customized to meet a range of particular requirements, ranging from confirming the compliance of industry regulations to ensuring that the correct reporting practices are being followed.
AUPs Offer a Focused Approach to Compliance
One of the main reasons AUPs can transform the way firms that are dealing with compliance issues is their flexibility and focus. Unlike an audit that is comprehensive that covers the entire range of financial reports, AUPs are tailored to address particular compliance areas that are of concern. This is essential for companies who only require to check certain aspects of compliance like tax filings and the anti-money laundering (AML) procedures or data privacy regulations.
For instance, when a company needs to determine whether it’s complying with the GDPR’s new requirements, an AUP could be created specifically to check compliance with the new GDPR rules. Similar to that, a company operating working in the field of healthcare could employ AUPs to make sure they are adhering to HIPAA protocols, while financial institutions could use AUPs to ensure conformity with Dodd-Frank Act.
By focusing on certain methods, businesses are able to quickly discover areas that are lacking or that need improvement which makes compliance audits more effective and less expensive.
Timely Identification of Compliance Gaps
One of the most significant dangers of non-compliance is the delayed identification of issues. The regulatory bodies typically impose strict deadlines for reporting and corrective actions, which leaves businesses scrambling to put their affairs in order. AUPs help businesses stay ahead of compliance deadlines by allowing for quick, focused assessments of regulatory adherence.
Since AUPs are created to be quick and precise, they enable companies to pinpoint possible compliance issues prior to them turning into a bigger issue. It doesn’t matter if it’s a minor error in reporting, or a serious violation of regulations or a law, an AUP allows businesses to resolve issues swiftly and be free of penalties.
For instance, when a business that is in the financial sector undergoes an AUP project that is focused upon its Anti-Money Laundering (AML) practices, it will be able to quickly uncover weaknesses in its reporting processes and make corrective steps well in advance of an audit or review by a regulatory authority.
Cost-Effective Solutions for Businesses that have Limited Resources
Compliance with regulatory authority can be a significant costly affair, especially for small to mid-sized companies that do not have the funds to commit to large-scale audits, or extensive internal audits. AUPs can be a cheaper alternative, by limiting the scope of compliance to the required procedures which reduces the time and cost.
While full audits are thorough and expensive, AUPs focus specifically on the processes that are most important to your company. This approach is targeted to ensure that businesses only pay for what they really need that is vital when funds are tight, but compliance remains top priority.
A company operating in an industry with strict regulations such as healthcare could require periodic AUP reviews to confirm the compliance of privacy laws such as HIPAA however, it doesn’t have to require a complete audit each year. By choosing AUPs that they are in compliance without spending a fortune.
Enhanced Confidence for Stakeholders and Regulators
For businesses that deal with external stakeholders, whether investors, regulators, or partners, trust and transparency are key. AUPs are clear and written findings that prove diligence and compliance with the regulations. It can be an effective instrument to increase the trust of stakeholders.
If a company is subject to an AUP, the independent third party who is responsible for the procedures will provide an annual report detailing the actions taken as well as results of the procedure. It not only provides companies with a picture of their compliance but it also serves as an important document to be presented to investors or regulators. It’s a great method to demonstrate that a business takes its regulatory responsibilities seriously and is striving to ensure compliance.
For companies that are subject to an audit or a regulatory review, presenting an AUP report can help streamline the process by demonstrating that they are already proactive in maintaining compliance. It shows that they have a commitment to transparency and independent validation of their practices.
Quick Turnaround, Minimal Disruption
Compliance assessments for regulatory authority can sometimes interrupt normal business operations particularly when they require long reviews or audits. AUPs however, on the contrary are generally more effective and less disruptive since they are focused on only particular areas of concern, permitting businesses to continue the business without interruption.
Because AUPs are specifically designed and don’t require a complete review of every financial statement or operation and can be performed quicker as opposed to traditional audits. This is a major benefit for companies that operate in time-sensitive sectors or who cannot afford the time and expense of an extended compliance audit.
AUPs: A Proactive Approach to Compliance
In a world where compliance can be the difference between flourishing or being fined, AUPs offer a proactive method to ensure that your company stays ahead of the technological advancements. If you’re dealing with specific regulations for your industry or larger requirements from the government, AUPs provide a flexible, efficient, targeted, and affordable solution for ensuring compliance and finding any inconsistencies.
When they choose AUPs, businesses can not only satisfy the requirements for compliance, but also improve the efficiency of their operations, decrease risk and avoid costly penalties. With AUPs you’re not only responding to compliance challenges, but you’re making sure you are ahead of the curve and ensuring that your company runs smoothly and within the bounds of the law.
If your business is trying to navigate the maze of compliance with regulations, consider joining forces with an experienced CPA firm such as Parr & Ibarra CPA in Keller, Texas for Agreed-Upon Procedures. We can create an AUP engagement to meet your particular needs and help to ensure compliance without the hassle.
