Government contracting can carry risks for both contractors and their accountants, and it’s not always obvious that a client is a government contractor. Many companies—both for-profit and nonprofit—that primarily service the private sector also contract with federal, state or local governments.
Some, like defense contractors, are in business for that purpose, while others just “dabble” with government contracting—and those are the ones CPAs need to know about. They may have inadequate internal controls to handle the unique challenges of selling to the government, which can lead to controversies and litigation.
For this reason, it’s important that CPAs be alert to clients that have business with the government and take appropriate steps to avoid unwarranted litigation.