SGS Pharmaceuticals is a development stage company (pre-revenue) performing research and development for two novel drugs designed to address specific types of cancers. The Company has two main drugs for which it is continuing research, and Phase 2 trials have continued to show promise. SGS would be a big client for both you and your firm. Please review the information below and the attached client acceptance package, and in a 1-2 page essay, document your considerations and whether you would accept this client.

As part of client acceptance, you have spoken with the Chief Scientific Officer (Sally) the CEO (Greg) and CFO (Sunil) of the Company. Your inquiries revealed no issues. The three each originally owned 1/3 of the Company and each contributed $2m. However, the Company is beginning to need financing, which is why they believe they need an audit. You understand this is fairly common for a company in this place within the business ecosystem. There is also a significant amount of debt on the books. The board is comprised of the three people noted, as well as an independent member, a member who does not have an equity stake in the Company, but who has lent significant debt to the Company.

You inquired with Olga, the independent board member, and she has concerns about whether all the debt on the books actually represent real cash receipts, since so many of the cash receipts were from the friends and family round of financing. She certainly cannot rule in any foul play, but she cannot rule it out either. The CFO did not have any similar concerns and believes the books and records are sound.