On 15 May 2026, in accordance with the Schedule for Conducting Master Classes Based on Audits Conducted by Advanced Auditors, approved by the Order of the Chairman of the Chamber of Auditors dated 15 May 2026, an online master class was held on the topic “Application of Standards on Agreed-Upon Engagements”. At the master class, Gasham Bayramov, Adviser to the Chairman of the Chamber on Scientific and Methodological Affairs, acted as moderator, while Rufat Aliyev, Director-Auditor of “A Audit and Consulting” LLC, acted as speaker.
Opening the master class with introductory remarks, Gasham Bayramov, Adviser to the Chairman of the Chamber on Scientific and Methodological Affairs, spoke about the importance of the topic “Application of Standards on Agreed-Upon Engagements” and the related International Standard on Related Services (ISRS) 4400 (Revised), “Agreed-Upon Procedures Engagements”, noting that this International Standard on Related Services (ISRS) establishes the following:
- The responsibilities of the practitioner when engaged to perform an agreed-upon procedures engagement;
- The form and content of the report on agreed-upon procedures.
ISRS applies to agreed-upon procedures engagements relating to subject matters of a financial or non-financial nature.
The value of an agreed-upon procedures engagement performed in accordance with ISRS is derived from the following:
- The practitioner’s compliance with professional standards, including relevant ethical requirements;
- Clear reporting of the procedures performed and the related results.
An agreed-upon procedures engagement is not an audit, review or other assurance engagement. An agreed-upon procedures engagement does not contemplate obtaining evidence for the purpose of expressing any form of opinion or assurance conclusion by the practitioner.
This ISRS includes the practitioner’s objectives in relation to compliance with ISRS, providing the context in which its requirements are set. The objectives are intended to assist the practitioner in understanding what needs to be accomplished in an agreed-upon procedures engagement.
This ISRS is effective for agreed-upon procedures engagements for which the terms of the engagement are agreed on or after 1 January 2022.
The practitioner’s objectives in an agreed-upon procedures engagement in accordance with ISRS are to:
- Agree with the engaging party the procedures to be performed;
- Perform the agreed-upon procedures;
- Report on the procedures performed and related findings in accordance with the requirements of this ISRS.
The practitioner shall agree the terms of the agreed-upon procedures engagement with the engaging party and record the agreed terms of the engagement in an engagement letter or other appropriate form of written agreement. These terms shall include the following.
The practitioner shall perform the agreed-upon procedures in accordance with the terms of the engagement.
The practitioner shall consider whether written representations are necessary.
The report on agreed-upon procedures shall be in writing and shall include the following.
The practitioner shall include the following in the engagement documentation:
- The written terms of the engagement and, where applicable, the engaging party’s agreement to changes in the procedures;
- The nature, timing and extent of the agreed-upon procedures performed;
- The results obtained from the agreed-upon procedures.
The practitioner shall agree the terms of the agreed-upon procedures engagement with the engaging party and record the agreed terms of the engagement in an engagement letter or other appropriate form of written agreement.
G. Bayramov gave the floor to R. Aliyev to speak on the topic. In his speech, R. Aliyev stated: “Dear fellow auditors! This training manual is built around actual audit work. It contains lessons drawn from real experience rather than theoretical knowledge.”
The material is based on an audit conducted in connection with the execution of the decision of the Baku Court of Appeal No. “X”. In his report, the auditor referred to ISA 4400, but, violating the main requirement of the standard, made five significant errors. As a result of these errors:
- The report became the subject of a complaint to the Chamber of Auditors;
- The respondent party raised an allegation of corruption;
- The enforcement process was delayed, and it became necessary to carry out the work again;
- The reputation of the audit firm was significantly damaged;
After reading this training manual, you will:
1. Know the fundamental difference between ISA 4400 and other auditing standards;
2. Learn which standard should be selected for which engagement;
3. Know how to properly prepare a “Report of Factual Findings”;
4. Be aware of typical errors and avoid them;
5. Be able to check your report before submitting it by using a practical checklist.
Theoretical knowledge is important, but true professionalism is developed through real experience. In this manual, you will see another auditor’s mistake, understand its cause, and learn not to repeat the same mistake in your own work.
The key feature of ISA 4400 is this: it is a NON-ASSURANCE service. This means that the auditor:
-Performs only the procedures agreed in advance;
-Reports only factual results (findings);
-Does not express any opinion, view, conclusion or assurance;
- The scope of use of the report is limited.
There are three levels of assurance in the auditing world:
|
Assurance level |
Standard |
Form of result |
Scope of work |
|
High (reasonable) |
ISA 700-799 |
Auditor’s opinion |
Broad |
|
Limited |
ISRE 2400-2410 |
Review conclusion |
Moderate |
|
NO (no assurance provided) |
ISA 4400, ISRS 4410 |
Report of Factual Findings |
Limited |
Attention: ISA 4400 is in the last row. This is important because the document issued by the auditor under this standard has limited legal force.
Typical uses of the standard include the following:
- Verification of specific indicators for a bank loan (for example, calculation ratios);
- Verification of specific accounts at the client’s request;
- Performance of specific procedures required by a government authority;
- Targeted due diligence in mergers and acquisitions;
- Special calculation procedures for a tax authority.
The main limitations of the standard for auditors are as follows:
- Cannot express an opinion on the overall correctness of the financial statements;
- Cannot assess the quality of the internal control system;
- Cannot conclude on the appropriateness of the accounting policy;
- Can provide a result only on specific agreed-upon procedures.
Choosing the wrong standard means making the wrong decision from the outset. Auditors often choose a standard that is convenient for themselves instead of selecting a standard that meets the client’s requirements. This is a serious mistake. The choice of standard depends on the nature of the engagement:
An ISA 4400 report should consist of 8 main sections. Each section has its own functional purpose:
Eight mandatory sections
1. Title: “Report of Factual Findings” or “Report on Agreed-Upon Procedures”.
2. Addressee: The exact name and address of the engaging party (“to the director of ... company”, etc.).
3. Description of the engagement: The purpose and scope of the report and the financial information to which it relates.
4. List of agreed-upon procedures: Each procedure separately numbered and precisely described.
5. Factual results (findings): The result of each procedure — factual and without evaluation.
6. Statement of limitations: It is clearly stated: “This is not an opinion, not an audit, and no assurance is provided”.
7. Intended use: Only for specific parties; general distribution is prohibited.
8. Signature, date, address: Auditor’s name, license number, date, city.
Section 6 of the report should contain a statement of limitations similar to the following:
“This report has been prepared solely for use by [name of party] for [specific purpose]. This report is the result of agreed-upon procedures performed in accordance with ISA 4400, “Agreed-Upon Procedures Engagements”. We did not perform an audit or a review. Accordingly, we do not express any assurance. Had we performed procedures other than those stated above, other matters might have come to our attention that we would have reported. Use of this report is restricted to the parties specified above and is not intended for, and should not be used by, anyone else.”
The auditor should not determine the procedures without consulting the third party. The engaging party and the intended user of an ISA 4400 report must both be RELIABLE, and both must agree on the procedures. If an enforcement officer gives the engagement but the result is used by the court, then both parties (enforcement officer + court) must approve the procedures.
ISA 4400 reports are intended for restricted use. The report must clearly state: “This report has been prepared solely for [specific party], for [specific purpose].” If this statement is absent and the report is distributed publicly, the auditor may be held liable.
Independence is not a mandatory requirement under ISA 4400, but it is good practice. If the auditor has a conflict of interest (for example, a family relationship with the client or shared business interests), this must be disclosed in the report. Without disclosure, the work loses credibility.
How each procedure was performed, what evidence supported it, and who reviewed it must be documented. Work performed under ISA 4400 must be retained for at least 5 years. In the event of a complaint, the Chamber of Auditors will request these working papers — if they do not exist, the auditor cannot defend their position.
“In my opinion...”, “Adequate...”, “Satisfactory...”, “Correct...”, “In proper order...” — these words should not appear in ISA 4400. Each expresses an evaluation, and an evaluation constitutes assurance. Instead, state facts: “The document indicates X”, “The calculation conforms to formula Y”.
AUDITOR’S CHECKLIST
Apply this checklist before submitting the report. If you do not receive a “Yes” answer for every point, review the report again.
Standard and terminology
- The report title is “Report of Factual Findings” or a similar form;
- The words “audit opinion” or “audit” are not used in the report;
- There are no evaluative words such as “in my opinion”, “adequate”, or “correct”;
- Findings are written as statements of fact rather than in categorical form;
- The standard name (ISA 4400) is clearly indicated in the report.
Procedures and evidence
- Each agreed-upon procedure is separately numbered and described;
- A factual result (finding) is indicated for each procedure;
- Each finding includes a reference to the source document;
- Copies of source documents are attached to the report;
- If there is more than one source and there is a contradiction, this is clearly stated.
Limitations and intended use
- The statement “This is not an opinion, not an audit, and no assurance is provided” is included;
- The intended use of the report is restricted (for whom and for what purpose);
- The restriction on use is clearly stated in writing;
- The auditor’s independence is addressed (if there is a conflict);
- There are no internal inconsistencies — all sections are consistent with one another.
Technical quality
- Calculations have been checked (calculator, Excel, formula);
- The production calendar and working days are accurate;
- Tax and deduction rates comply with the applicable legislation;
- All figures correspond with the text;
- Dates and signatures are in place.
Every auditor makes mistakes — but a professional auditor does not make the same mistake twice. Your responsibility is to apply what you have learned in your daily practice.
The master class continued with practical discussions, and the participants’ questions were answered.
Approximately 100 members of the Chamber of Auditors participated in the master class.
Chamber of Auditors of the Republic of Azerbaijan
