The allegations of overstated revenue and financial fraud at Entellium are sparking a debate in the Seattle technology community about board oversight and the role of audits at venture-backed companies. Now we've learned this: Moss Adams, the accounting firm for Entellium, says it never completed a full audit of the Seattle software startup.

The information comes a day after the top two executives were charged with wire fraud in federal court Wednesday for allegedly "cooking the books" at the software startup.

Moss Adams’ chief practice officer Neal West said his firm was engaged to perform audits on Entellium in “multiple years,” but did not complete any of the audits and therefore never issued any reports or opinions. West did not know which years the audits were started and why they were never completed, but said his office is looking into it.

 “We did not complete any audits and therefore never issued any opinions on their financial statements,” West said. “We’re still in the midst of looking at our records on this and beyond that I’m not able to comment."

Asked if Entellium was using any other accounting firms, West said “not to my knowledge.”

It was unclear whether Entellium or its board requested audits. Ignition Partners, one of the largest venture backers of Entellium, did not immediately return calls seeking comment on the audit question.

There is some disagreement among investors, lawyers and accountants as to whether an audit actually would have uncovered fraudulent activities at Entellium.

“It surprised me there wasn’t an audit, but I don’t know what went into that decision,” said Alan Smith, a partner at the Fenwick & West law firm in Seattle. Smith said startups often get an audit after the first major funding rolls in.

Smith added: “Even the best-intended directors that are active and engaged are going to have a difficult time uncovering something like this if management is determined to hide it.” Bill Bryant, a venture capitalist at Draper Fisher Jurvetson, agreed.

 “Entellium should have at least had a review, but that may not have caught the fraud,” he said. “Enron and WorldCom had full audits, and people still didn’t catch on to what was going on for a number of years.”

Roger Clark, an accountant with the Seattle office of Grant Thornton, said an audit of Entellium’s business most likely would have uncovered discrepancies in revenue. “It was likely that an audit was never done on this company,” said Clark. “You test the numbers the company gives you, and then you see if those numbers match the auditing work.” In this case, an auditor would have investigated key customer contracts, revenue recognition, receipts and other factors, he said.

While Clark said it is common for venture capital firms to request audits before making an investment, he added that they are sometimes waived in tough times due to the added expense.

In the Entellium case, Clark said it appears that executives allegedly adjusted revenue with the hope of making up the shortfall in future quarters. In the end, Clark said, “they got trapped.” “It is really a disaster for everyone involved,” Clark said. “It is a personal disaster for the two officers. It is a disaster for the venture funds that lost their money. And it is a disaster for employees who were trusting their leaders.”