An internal accountant and a former general manager at a now defunct Nova Scotia home-heating oil firm made misrepresentations related to its financial statements, according to new claims made in a legal case involving the company, which collapsed into bankruptcy last month.

Maritime Fuels, which owes tens of millions of dollars to its creditors, sued its former accounting firm for negligence this fall, accusing it of signing off on statements showing the company was profitable when in fact it was suffering a $9.5-million shortfall.

A notice of defence filed Friday by accountant Baker Tilly Nova Scotia denies all allegations against it, and blames Maritime Fuels for the problems, including two company officials who allegedly made representations about the finances of the company that turned out to be untrue.

Maritime Fuels, which served thousands of homes and businesses in Nova Scotia and New Brunswick, abruptly stopped deliveries in November. It owes an unknown number of customers who prepaid for furnace oil roughly $2.5 million. Records show the company has few assets to cover $51 million in overall liabilities.

The lawsuit relates to the company's 2019 and 2020 financial statements, which were reviewed by Baker Tilly and showed Maritime Fuels was profitable.

But when the company began facing consistent cash problems, it hired another outside accountant to dig more deeply into the books. He discovered a huge shortfall for 2020.

It was at that time that Charles Higgins, a general manager and co-owner of Maritime Fuels, resigned and left the company, according to the notice of defence. No reason for his departure is given in court records.

Baker Tilly also notes the controller of Maritime Fuels, Scott Whitehead, was subsequently reprimanded by Chartered Professional Accountants Nova Scotia, the provincial regulator, for his role in preparing the financial statements.

He "largely admitted" to allegations he failed to prepare accurate financial statements and didn't issue accurate reports to banks and shareholders, according to a notice posted on the regulator's website.

A summary of the decision in his case said Whitehead described how an "internal system" failed, and that financial information needed to be recreated in order to complete the financial statements.

There was also evidence he failed to maintain "an adequate control environment," including safeguarding passwords and issues related to policies and back-up processes.

Baker Tilly said in court filings it was only hired to review the financial statements, not to audit them, and said a review "cannot be relied upon to prevent or detect fraud, error, or other irregularities."

It said management of Maritime Fuels provided numerous "representation letters" that confirmed various transactions, disclosures and other financial aspects of its business.

The notice of defence said both Higgins and Whitehead claimed the financial statements prepared by the company were in accordance with Canadian accounting standards, but that wasn't true. One or both of them knew that to be the case, or they were negligent, the defence said.

Ryan Stack, an assistant professor of accounting at Acadia University, said there are significant differences between a review and an audit.

A review involves an accountant asking management questions about potential issues, but it doesn't typically dig deeper if the answers that come back are "plausible," he said. An audit seeks to confirm the numbers using evidence, such as examining bank accounts, transactions, invoices and assets.

Maritime Fuels's shareholders were relying on a review as "a check, but they didn't get the platinum package where they would see a lot more," Stack said.

One of Maritime Fuels's largest creditors is Western Petroleum Newfoundland Ltd., which is owed $20 million. Both are controlled by Newfoundland businessman Ivan Cassell.

Western Petroleum has claimed it relied on the financial statements of Maritime Fuels that showed it was in good financial health when deciding to lend it money to make up for shortfalls thought to be due to its rapid expansion.

Baker Tilly said in its notice of defence that Western Petroleum loaned the money to Maritime Fuels after the problems with 2020 financial statements were detected in the fall of 2021.

Whitehead didn't reply to requests for comment. Cassell has not responded to interview requests. CBC News has been unable to contact Higgins, and a lawyer for Baker Tilly declined to comment Monday.