Essay about Nextcard Case

946 Words Apr 30th, 2013 4 Pages
Questions:
1. Should auditors evaluate the soundness of a client’s business model? Defend your answer.
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.

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 the engagement?

The three examples of risk factors (a) pressure, (b) opportunities, and (c) rationalizations. Nextcard‘s pressure was in rapid growth by extending credit of
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AICPA Code of Professional Conduct, were also a violation of their professional ethics and integrity as public accountants.

5. When he became a member of the NextCard audit engagement team, Oliver Flanagan hoped that Robert Trauger would serve as his mentor. What responsibility, if any, do senior audit personnel have to serve as mentors for their subordinates?

Senior auditors are an example to follow. Their behavior and culture should positively influence their people. Senior auditors must constantly exercise proper judgment and behavior and inspire subordinates to do the same. Trauger had a position of authority and respect to make ethical and professional decisions for the firm and to guide those he is supervising. He failed when he requested to revise the prior year audit workpapers.
6. Assume the role of Oliver Flanagan in this case. What would you have done when Robert Trauger asked you to help him alter the 2000 NextCard audit workpapers? In answering this question, identify the alternative courses of action available to you. Also identify the individuals who may be affected by your decision and briefly describe how they may be affected.

If I was Oliver Flanagan I would have told Trauger that there was no way that I would alter 2000 NextCard audit work papers. I would explain to Trauger that even though I respect him a lot and I wanted him to be my mentor, I would not be willing to break the law or go to

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