You have been asked by Ambassador Hardware Co., a small nonpublic company, to submit a proposal for the audit of the company. After performing an investigation of the company, including its management and accounting system, you advise the president of Ambassador that the audit fee will be approximately $20,000. Ambassador's president was somewhat surprised at the fee, and after discussions with members of the board of directors, he concluded that the company could not afford an audit at this time.
a. Discuss management's alternatives to having their company's financial statements audited in accordance with generally accepted auditing standards.
b. What should Ambassador's management consider when selecting the type of service that you should provide? Explain.