Next Card Inc was a company that was headquartered in California, USA who was one among the first issuers of online credit cards in the market. In order to interpret the situation in the case of Next Card Inc, various media resources and other sources have been analysed. On 31st October 2001 there was an announcement that the company Next Card was under-capitalized and this was followed by an investigation that was done by the Office of the Comptroller of the Currency and FDIC (Federal Deposit Insurance Corporation). The explanation for the under-capitalization was stated that the firm was categorizing under as fraud losses that must have been stated as under credit losses (Kelly et al., 2016). This can be interpreted as the business tried to categorize this as a fraud that was a loss of money due to the cards issuance to the individuals with the very poor credit scores. Following to this instances, the investors of the Next Card soon filed a lawsuit that charged the management with hidden financial status of the business and insider trading.
In addition to the controversies, the external auditor of Next Card, Ernst & Young who edited electronic timestamps and past work papers of the audit in the manner to rid themselves from any form of liabilities for the services rendered to Next Card. One among auditors who gave away the evidences to the federal authorities that proved auditors gave a clear report (Walker et al., 2018). Thomas Trauger was the lead auditor of the Next Card. Subsequently, Next Card in 2003 was liquated that had $ 470 Million in liabilities. The auditor’s role in the fraud is evident and for that reason the auditor was penalized with a jail term for one year
Kelly, J. V., Helgesen, J. P., Zvercov, V., Bourbour, F., & Rynda, R. J. (2016). U.S. Patent No. 9,504,905. Washington, DC: U.S. Patent and Trademark Office.
Walker, K., Watkins, R., Newman, S., Pullen, J., Osborne, D., Milton, S., & Davies, T. (2018). Sharing the results of a patient satisfaction audit. British Journal of Nursing, 27(5), S4-S14.