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An accounting firm took on a new client from the advice of a good friend, but it didn’t conduct proper due diligence. Big mistake. During an inventory, the client’s CEO repeatedly lied to the author — a fraud examiner — and the external auditors he worked with. Here’s how to avoid fraudulent clients and keep your sanity.

Inland Distributors was a new client of Shipman Calabrese, a regional public accounting firm where I worked as a manager. Josh Addision, a well-respected banker with Family Bank and a good friend to Shipman Calabrese, had recommended that the owners of Inland Distributors, who were seeking new auditors, contact our firm. Shipman Calabrese had a great reputation with Josh and Family Bank.

According to Josh, the owners of Inland, a large distributor of machinery with annual revenues of approximately $25 million, were in discussions with him to restructure the company’s financing and potentially move their borrowing and banking relationships over to Family Bank.

Sam Forde was president and chief executive officer and a primary shareholder of Inland. Brad Crossman was chief financial officer. Evan Bowers, working under Brad, was the controller.

I was a “utility player” with significant forensic and fraud examination experience at Shipman Calabrese. Our engagement partner would frequently add me to traditional audit teams for risky or new engagements to complement skills and experience.

 


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