Analysis of Nextcard.Inc
Nextcard, Inc.
Jeremy Lent lunched a company named Nextcard. Inc. aims to earn money by helping people get credit card more conveniently. But there is two huge flaws in this strategy, first, the way nextcard to obtain new customers proved to be much higher than the figure Lent had originally projected. Second, the people who signed up for the NextBank credit card proved to be much higher credit risk than Lent had expected. So, the result is big bad debts. But the company’s officials still insist that the increasing allowance for bad debts is caused by hackers and other Internet miscreants. Then in late 2001, they got a large class-action lawsuit by the angry investors.
While the real big problem is what the audit partner Thomas Trauger did. In order to make the workpapers appear as if the auditing teams had been ‘right on the mark’ all along, he modifying the workpapers and scour the evidences. Instead of scour the evidence, Trauger’s subordinate gave it to federal authorities.
I think the audit issue we should concern about is the destroying of documents. As it is said in the paragraph, the financial markets depend on the integrity of auditors, lawyers and other professionals to do their jobs ethically and fairly. If they fail to do so, the damage is huge, and the mistake is unforgivable. But I didn’t appreciate what Trauger’s subordinate did. He should at least persuade his superior not to do this. He pretend to be obey the boss’s order while do another thing behind higher’s back is kind of betraying. On the other side, Trauger is incompetent to be a good mentor. He didn’t teach his subordinate to be honest auditor.
Whether the auditor should evaluate the soundness of a client’s business model is depends on the position of the auditor. If the clients asked about the suggestions, they can give some advices. If they are not been asked to do, I think the business model is out of an auditor’s obligations.
Jeremy Lent lunched a company named Nextcard. Inc. aims to earn money by helping people get credit card more conveniently. But there is two huge flaws in this strategy, first, the way nextcard to obtain new customers proved to be much higher than the figure Lent had originally projected. Second, the people who signed up for the NextBank credit card proved to be much higher credit risk than Lent had expected. So, the result is big bad debts. But the company’s officials still insist that the increasing allowance for bad debts is caused by hackers and other Internet miscreants. Then in late 2001, they got a large class-action lawsuit by the angry investors.
While the real big problem is what the audit partner Thomas Trauger did. In order to make the workpapers appear as if the auditing teams had been ‘right on the mark’ all along, he modifying the workpapers and scour the evidences. Instead of scour the evidence, Trauger’s subordinate gave it to federal authorities.
I think the audit issue we should concern about is the destroying of documents. As it is said in the paragraph, the financial markets depend on the integrity of auditors, lawyers and other professionals to do their jobs ethically and fairly. If they fail to do so, the damage is huge, and the mistake is unforgivable. But I didn’t appreciate what Trauger’s subordinate did. He should at least persuade his superior not to do this. He pretend to be obey the boss’s order while do another thing behind higher’s back is kind of betraying. On the other side, Trauger is incompetent to be a good mentor. He didn’t teach his subordinate to be honest auditor.
Whether the auditor should evaluate the soundness of a client’s business model is depends on the position of the auditor. If the clients asked about the suggestions, they can give some advices. If they are not been asked to do, I think the business model is out of an auditor’s obligations.