Science CaseEssay Preview: Science CaseReport this essayIntroductionNew century financial corporation had experienced years of financial growth, in terms of stock price appreciation before facing serious accounting problems, early in the year 2007. This forced the corporation to enter in to liquidity. This forced the company to file for a bankruptcy protection, under chapter 11 of Bankruptcy protection policy. According to the expert assigned the role of carrying out investigations at New Century, the problems that faced the company caused the subprime meltdown, which caused a financial crisis in the United States of America along with other countries.
This research paper analysis looks at the performance of New Century Financial Corporations internal accounting control systems. The paper looks at the business model and accounting practices of the New Century Financial Corporation and focuses on the role played by the management, external auditors, and audit committee in the problems that New Century Financial Corporation encountered.
DiscussionAccounting control systems help business organizations to use their data and financial information in a uniform manner. Three key divisions exist within the accounting control systems, which include analysis, design, and implementation. This compliments with a system of control, which a certain organization puts in place. The internal control refers to a system that plays a key role in the accounting system. It protects businesses from abuse and fraud. The internal control system ensures accuracy of information, in terms of time and regulatory requirements. Internal control must take into account environmental control, risk assessment, control procedures, monitoring, evaluation, and communication strategies. Each area mentioned contributes to the effectiveness of the control system. When one of these key areas gets secluded, the control strategies and the control system fail to work as expected. These areas form part of the accounting control systems of the New Century Financial Corporation that caused the financial problems in the corporation (Khuzami, 17).
New Century Financial corporation decent came swiftly and dramatic. The stock price dropped and on March 2, 2007, the company decided to announce that it would not file its financial report for the year 2006. This decision made many company lenders become suspicious and refused to provide further funding for the operations of the corporations. Because of these happenings, New Century Financial Corporation decided not to accept any loan application on March 8, 2007. The New York stock exchange removed the company from its list some days after the happening. Two months later after the delisting happened New Century Financial Corporation, and its affiliates filed a bankruptcy protection. This followed a series of certain events in the corporation. KPMG LLP, a new York based independent auditing company resigned
KPMG received various loan applications from major bank, which was in fact an outflow of money from the bank to New Century Financial Corporation to create the collapse. According to a source of this fact note I have provided to you: According to an internal source at the time of the delisting, New Century’s banking operations changed significantly in August of 2007. As of late 2008 New Century Financial Corporation had ceased to operate at the time of the delisting, and KPMG was not able to obtain assistance or a bank loan from the NYSE for the period that had followed the event.
Also as the delisting of New Century Financial Corporation came to a head, New Century Financial Corporation also had to provide financials as to what had happened to its operations. According to the source, New Century’s operating budget and financial reports were not sufficient to support its operations and other financial needs to the end of 2007. New Century Financial Corporation also had to do a lot of handwringing to convince New York City to extend the loan with a capital gain. This was done by the NYC bankruptcy-protection program which allowed it to transfer money back to all the banks in the NY which had been under a direct investment in New Century Financial Inc. and other corporate subsidiaries, to the NYSE where New Century Financial Corporation would then take over the financial activities of those banks when it was gone. According to these two sources the NYSE has decided not to apply any additional financing for these banks (a situation that has apparently not become apparent to us since 2001 so far; KPMG cannot confirm if any lending has been increased.)
KPMG’s Financial Condition and Finances
KPMG was not one to use any financial assets or resources for any purpose. By the very same rule the NYSE approved the sale of KPMG Corporation to KPCS Co. KPMG had a long and complicated ownership relationship with the NYSE, with the Bank of New York owning a substantial portion of and operating KPMG. It was stated in several securities statements in New York stock markets that KPMG had a control interest in the NYSE and a large portion of the stock is owned by the NYSE.
Bank of New York securities
A lot of banks have different stock ownership preferences. For each type there are certain rules that will govern in what amounts and who is allowed to buy different sorts of stocks and shares of the same firm. The same rules apply for NYX and TSX. For each kind there exists a legal limit for the quantity of stock owned in a company. As for the amount of stock of certain types, you can’t buy any securities with different rights or in the same class of securities, and it is illegal to buy securities with various shares.
For most types of stock those rights/rights won’t be known until that’s changed, but that doesn’t stop the NYSE from trying to keep its customers and their financial institutions in line and allow them to buy or sell stocks at a discount.
For specific types of stock there exist different rules that apply to each class and each type of interest.
New York securities
In recent years several banks have bought a lot of NYSE securities. It seems that New York stocks are not part of