When Lenders Ask for Agreed-Upon Procedures Instead of a Full Audit

Regional lenders sometimes accept agreed-upon procedures when a statutory audit is not legally required but covenant compliance still needs independent checking. The work looks similar at first glance — sampling, confirmations, recalculation — yet the report does not express an opinion on the financial statements as a whole.

The engagement letter must list every procedure the lender expects. Typical items include recalculating debt service coverage from management’s figures, agreeing cash balances to bank statements on a specified date, and testing a sample of related-party transactions against board minutes. Ambiguous wording such as “review the financial position” invites scope disputes later.

Findings are factual. We report exceptions without concluding whether covenants were met unless that conclusion is itself a listed procedure. Management remains responsible for interpreting the loan agreement. We will not soft-pedal an exception to preserve a banking relationship; clarity protects both the borrower and the lender.

Choose this route when the lender’s checklist is narrow and your books are already reliable. Choose a full statutory audit when shareholders, regulators, or complex inventory valuation demand a broader opinion. Mixing the two without a clear letter creates false comfort and wasted fieldwork.