Question

Davis, CPA, accepted an engagement to audit the financial statements of Tech Resources, a nonpublic entity. Before the completion of the audit, Tech requested Davis to change the engagement to a compilation of financial statements. Before Davis agrees to change the engagement, Davis is required to consider the

Additional audit effort necessary to complete the audit: Yes Reason given for Tech's request: Yes

Answer 1

Before changing from an audit to a compilation engagement, Davis, CPA, must consider the reason for Tech Resources' request and the additional audit effort already made, ensuring no ethical or regulatory standards are violated.

Step-by-step explanation:

When Davis, CPA, is requested to change an audit engagement to a compilation engagement, several factors need to be considered before agreeing to the change. Davis must contemplate the legitimate reason provided by Tech Resources for the request and assess whether there has been any additional audit effort that has already been expended.

If substantial progress has been made in the audit process, this could affect the decision to switch to a compilation. Additionally, Davis must ensure that the change does not violate any ethical standards or regulatory requirements and contemplate the implications regarding the intended use of the financial statements by third parties.