1. Should auditors evaluate the soundness of a client’s business model? Defend your answer.
We are in agreeance that auditors should evaluate the soundness of a client’s business model. This would be an essential part of auditor’s inherent risk assessment process. The risk assessment is to understand the entity, its environment, and internal control to identify and assess the risk of material misstatement whether due to fraud or error at the financial statement and relevant assertion levels (AU-C Section 315, 2015)
2. Identify and briefly describe the specific fraud risk factors present during the 2000 NextCard audit. How should these factors have affected the planning and execution of that engagement?
I totally agree with your response to this question. You described some of the fraud risk factors present during the 2000 Nextcard audit. You could have added one additional fraud risk factor that Nextcard had a weak internal control environment. NextCard intentionally underestimated the allowances for bad debt. And denied it was due to high credit losses but stated it was due to fraud schemes (Knapp, 2015)
3. What are the primary objectives an audit team hopes to accomplish by preparing a proper set of workpapers?
I agree with your response to this question. You answered the question in the same manner in which I would have. I think …show more content…
I like how you listed all ten of the auditing standards according to AU Section 150 in order to give us the readers a better understanding. I agree with you on three principles violated by the E&Y auditors in this case. I would like to add two additional standards I feel E&Y auditors violated. AS No. 4 Reporting on Whether a Previously Reported Material Weakness Continues to Exist. NextCard understated allowance for bad debit for each reporting period. AS No. 10 Supervision of the audit engagement. The team of auditor’s helped conceal NextCard’s financial problems and altered
We are in agreeance that auditors should evaluate the soundness of a client’s business model. This would be an essential part of auditor’s inherent risk assessment process. The risk assessment is to understand the entity, its environment, and internal control to identify and assess the risk of material misstatement whether due to fraud or error at the financial statement and relevant assertion levels (AU-C Section 315, 2015)
2. Identify and briefly describe the specific fraud risk factors present during the 2000 NextCard audit. How should these factors have affected the planning and execution of that engagement?
I totally agree with your response to this question. You described some of the fraud risk factors present during the 2000 Nextcard audit. You could have added one additional fraud risk factor that Nextcard had a weak internal control environment. NextCard intentionally underestimated the allowances for bad debt. And denied it was due to high credit losses but stated it was due to fraud schemes (Knapp, 2015)
3. What are the primary objectives an audit team hopes to accomplish by preparing a proper set of workpapers?
I agree with your response to this question. You answered the question in the same manner in which I would have. I think …show more content…
I like how you listed all ten of the auditing standards according to AU Section 150 in order to give us the readers a better understanding. I agree with you on three principles violated by the E&Y auditors in this case. I would like to add two additional standards I feel E&Y auditors violated. AS No. 4 Reporting on Whether a Previously Reported Material Weakness Continues to Exist. NextCard understated allowance for bad debit for each reporting period. AS No. 10 Supervision of the audit engagement. The team of auditor’s helped conceal NextCard’s financial problems and altered