SITUATION B

The President of Shambra Products has consulted you in regard to an audit. Shambra, which has never been audited, has been developing a process to convert swamp gas into natural gas. Although developments to date have been encouraging, numerous problems remain to be resolved.

The company has expended substantially all of the funds it has been able to raise to date, and an audit is needed in connection with further attempts to raise money from a stock or debt offering. The company does not have sufficient funds to pay for an audit now, but will be able to pay if additional funding is acquired. Although the company is small at the present time, it has the potential for becoming one of the largest companies in the nation if it is successful in developing its process.

REQUIRED:

Should you accept the audit of Shambra Products? If so, why? If not, why not?