Expert: Richard Stolp - 5/25/2010

Question
If a potential audit client has good references, is respected, shows nothing negative on the Dun & Bradstreet report but did have a civil fraud penalty 10 years ago due to a large captial loss reported on a sale of land to a trust which was actually in his married daughter's name and him listed as the trustee; sould the potential audit client be accepted?  Does it make any difference if the client and a partner from the CPA firm are both on the board of directors of a local civic organization?  Thanks in advance.

Answer
Hi Susan,
This is a little out of my league. I assume you have met the principles - sounds like you have some doubts. What happened to their last auditor - can you do a reference check with the last audit company? How big a part of your business will this client be? Having both firms represented on a board shouldn't be a problem - unless you are the auditor for them also. How does your new prospect treat their customers? If you have the choice I would follow your gut and not just the profit.