The American Institute of CPAs’ Auditing Standards Board has issued a new attestation standard for agreed-upon procedures engagements related to asset-backed securitizations.

Attestation Interpretation No. 1 of AT section 201, Agreed-Upon Procedures Engagements (AICPA, Professional Standards), provides guidance for  third-party due diligence services performed as agreed-upon procedures, or AUP, engagements related to asset-backed securitizations, as defined in the U.S. Securities and Exchange Commission Release No. 34-72936, Nationally Recognized Statistical Rating Organizations.

The SEC release requires the issuer or underwriter of an asset-backed securitization to make publicly available the findings and conclusions of any third-party due diligence report obtained by the issuer or underwriter. The release also says the disclosure of the findings and conclusions should include a disclosure of the criteria against which the loans were evaluated, and how the evaluated loans compared to those criteria, along with the basis for including any loans not meeting those criteria. This would be accomplished by including the information in Form ABS-15G, “Asset-Backed Securitizer Report Pursuant to Section 15G of the Securities Exchange Act of 1934,” which is required to be furnished by the issuer or underwriter to the SEC. 

Any third-party due diligence service provider is also required by the SEC release to complete Form ABS Due Diligence-15E, “Certification of Provider of Third-Party Due Diligence Services for Asset-Backed Securities.” The form asks for information about the due diligence performed, including a description of the work performed and a summary of findings and conclusions of the third party.

The AICPA interpretation addresses the distribution of procedures or findings, or both, under AT section 201 when due diligence services in Form ABS Due Diligence-15E and Form ABS-15G are performed as an AUP engagement and  the practitioner’s Form ABS Due Diligence-15E reporting responsibilities.

It also addresses how a practitioner might modify the illustrative report wording in AT section 201 to clarify the requirements and limitations of AUP engagements and reports as it relates to due diligence services.

The AICPA noted that the distribution of the procedures or findings, or both, of the practitioner’s due diligence services in the Form ABS Due Diligence-15E or Form ABS-15G is not prohibited because the distribution of that information is required by regulation to be made available to the public.

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