NextCard
NextCard, Inc. Case
1. The auditor should not have to evaluate the soundness of the business model. Instead of figuring out if the client is sound, the auditor should be making sure they properly know the company and the industry they are in. Once they know and understand the company can then complete a successful audit.
2. One of the specific risk factors present during the audit was the fact that NextCard was not properly checking applicant’s credit reports. This is a risk because they could be giving credit cards to people who will not promptly pay off their bills, this would lead to a huge loss for NextCard. Since they continued to accept more and more applicants they should have been aware of who they were allowing to have their cards. Due the high risk of this there should be a low detection risk implicated to flag any future problems.
3. The primary objectives an audit team hopes to accomplish by preparing a proper set of audit workpapers because when an auditor comes in they are able to reference this documentation and see how effective the internal controls has been. This will show that the company was following exactly what they set out to do, if they followed exactly what they planned to do then everything will be audited well. This will also be available to reference in the future in case anything happens.
4. The auditing standards violated by E&Y auditors in this case they failed to following the plan they set out to achieve and they were not properly overseeing what was going on in their company.
1. The auditor should not have to evaluate the soundness of the business model. Instead of figuring out if the client is sound, the auditor should be making sure they properly know the company and the industry they are in. Once they know and understand the company can then complete a successful audit.
2. One of the specific risk factors present during the audit was the fact that NextCard was not properly checking applicant’s credit reports. This is a risk because they could be giving credit cards to people who will not promptly pay off their bills, this would lead to a huge loss for NextCard. Since they continued to accept more and more applicants they should have been aware of who they were allowing to have their cards. Due the high risk of this there should be a low detection risk implicated to flag any future problems.
3. The primary objectives an audit team hopes to accomplish by preparing a proper set of audit workpapers because when an auditor comes in they are able to reference this documentation and see how effective the internal controls has been. This will show that the company was following exactly what they set out to do, if they followed exactly what they planned to do then everything will be audited well. This will also be available to reference in the future in case anything happens.
4. The auditing standards violated by E&Y auditors in this case they failed to following the plan they set out to achieve and they were not properly overseeing what was going on in their company.