Auditing New Century Financial Corporation Essay

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As they can use this mechanism to: protect themselves and not directly reveal this information to the general public. ("Mortgage Mess, n.d.)

A good example of this can be seen with New Century Financial during: the 2004 and 2005 audits. In this situation, KPMG discovered seven different internal controls that were considered to be: a material breach in the law. However, they did not disclose this information to investors. Instead, KMPG issues an unqualified opinion, which helped to protect them against the actions of their staff. Once the New Century began to collapse under its own weight, was the point that the KPMG would hide behind these opinions. As the company claimed that they provided accurate information, yet no one was able to see the bankruptcy of the company coming out of nowhere. This is important, because it shows how accounting firms can issue unqualified opinions about: internal weaknesses, without having to worry about legal liabilities. ("Mortgage Mess, n.d.)

When you step back and analyze the situation, it is clear that KMPG did play a role in helping contribute to the demise of New Century Financial.

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This is because auditors were able to identify, a number of different internal weaknesses that would have a direct impact upon the operating results that were reported. As KPMG identified seven different internal weaknesses inside their organization, that could increase the chances of the company facing financial difficulties in the future. Instead of disclosing this information to: the company or working with executives to establish various internal controls to deal with these issues. Auditors were releasing unqualified opinions of facts, as they found that this allowed them to avoid having direct confrontations with company executives about: their business practices. While at the same time, they were able to avoid the various legal issues that they were wrestling with. As they disclosed this information; but, not in a way that raised red flags to: investors and regulators. ("Mortgage Mess, n.d.).....

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