Case Study Of Nextcard, Inc. Audit Case Study

Knowledge about risks related to the company evaluated as part of the auditor 's client acceptance and retention evaluation; and the relative complexity of the company 's operations. ( Auditing Standard No. 9 //. (n.d.).

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Quality Objectives - The quality objectives define measurable goals relative to the company's quality management system. Requirements on the quality objectives are in ISO 9001:2008 section 5.4.1.

An important decision for any shareholder is deciding whether or not to do business with that company. When a business is audited, the operations are reviewed to make sure that nothing is being hidden. An auditor will review the company’s financial statement and practices to confirm that each are direct and correct. The financial statements are the business’s way of representing them and showing that they are following the Generally Accepted Accounting Principles. The audit process is an important one because it provides a platform for the auditor’s opinion concerning the financial statements of the company. As part of the audit process the auditor will conduct an audit plan that outlines a number of actions that he or she will be perform while also detailing the reason for those actions. With every audit, the business’s management is in charge of handing over the financial statements that the auditor will review; while the auditor will review the statements for any material or immaterial misstatements.

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Descriptions of the main aspects of the regulatory environment which will protect the public from fraud within corporations are going to be provided in this paper. A special attention to the Sarbanes – Oxley Act of 2002 (SOX) requirement; along with an evaluation of whether Sarbanes-Oxley Act will be effective in avoiding future frauds based on their implemented rules and regulations.

There were multiple risk factors present in the Nextcard Inc. case. Thomas Trauger, auditor, had authorized an unqualified opinion on Nextcard’s 2000 financial statements although the evidence did not justify an unqualified opinion. Nextcard had huge operating losses and had been reporting much smaller allowances for bad debts than they had been observing. Their management regularly made material understatements of the company’s allowance for credit losses. Also most of the financial decisions rested solely in the hands of Jeremy Lent, Chief Financial Officer. Another risk factor was the fact that the executives had large amounts of stock and immediately sold them after the lock down from the initial public offering was made. Events from 2000 that were notable include the following:

In October 2001, Enron Corporation which was one of the world major energy, commodities and service companies with claimed revenues of nearly 111 billion dollars during 2000 collapsed under the weight of massive fraud in that it has become largest bankruptcy recognition in the US economy. Enron’s earning report was extremely skewed that losses were not represented in their entirety, prompting more and more wishing to participate in what seemed like a profitable company. After collapse of Enron, Auditor independence has become a social issue that weather auditor has to be independent or not. In addition, while auditing must consider matters objectively with dispassion, there were still doubts whether it implemented well. Further, there has been much speculation about the need for the mandatory rotation of auditors or audit firm rotation to warn false accounting between audit firm and client. By examining Enron case, this essay will discuss about advantages and drawbacks of the mandatory rotation of

Hogan, Rezaee, Riley, and Velury (2008) noted the development of the auditing standards created due to the financial scandals that have occurred over the years. However, the authors note even with the development of SOX and SAS No. 99 there still does not appear to be a decline in financial statement fraud (232).

This paper explores the ZZZZ Best Company which was begun by a 16 year old individual who was able to pull the wool over the eyes of many customers, investors and auditors. This paper will define the difference between review and audit when it comes to financial reports, comments on the procedures provided with regard to the management assertion of occurrence, verification of payments for jobs and how they can lead auditors to improper conclusion, the purpose of predecessor-successor auditor communications, as well as whom needs to initiate the communication and information that needs to be obtained. The paper also addresses the limitations of the confidentiality agreement and how and when

Another important factor discussed in New Century’s case was whether audit engagement team was able to obtain a sufficient understanding of the underlying business activities, and analyze the effectiveness of internal control system. KPMG’s auditors does not understand the subprime mortgage sector of the lending industry and did not try to point out inadequate accounting procedures or resolve the internal control deficiencies in New Century’s accounting system that eventually lead to a significant understatements of company’s loan loss reserve account. In Jack Greenberg Inc, Fred refused to upgrade to computerized accounting system and the company’s

This report plans the audit for the company Pacific Star Network Limited. This report covers only the first stage of an audit that is risk assessment. Planning of an audit requires that the auditor plan their audit by assessing the risk elements and try to reduce that risk using different audit risk procedure calculations. This report tells about the accounts, which have the most risk of being materially misstated in the Balance sheet and Statement of financial position of the company report of the year 2015 and 2014. For identify the misstated account, simple comparison analytical procedure is used. This report also set the materiality level for the purpose of audit. Therefore, the reason for material misstated can be identify.

The auditor’s responsibility is not to evaluate a client’s business model but to have a sufficient understanding of the entity. An auditor needs a sound and comprehensive understanding of the client’s business and industry to develop valid expectations about financial-statement assertions.

The auditing firm has been in engagement with the company throughout the period when the fraud was being committed. One of the common and clear indicators of possible fraud was the company’s cash flow statement. The company experienced positive growth in its profits from the year 1996 through to the year 1998. However, a close analysis of the cash flow statement shows that the company had experienced negative figures of cash flow from both operating and investing activities and positive cash flow from financing activities which would not sufficiently offset the negative cash flows from operating and investing. It is therefore evident

A number of financial statement frauds went undetected from auditors in past and attracted a high profile attention. The businessmen add fake assets or transfer the assets of companies to their personal assets and result in accounting scandals when the affected companies are bankrupted or are even close of bankruptcy. Just to mention a few names, accounting scandals of Enron, AOL Time Warner and Xerox are among the hottest accounting scandals of the century. This means that despite presence of professional auditors accounting scandals happen and there is a need to learn from the mistakes of the auditors who overlooked these activities. In this report the case study of Xerox is analyzed in detail to highlight violations of accounting principles and present an example from which lessons can be learnt for the future.