New 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 Corporation's 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.
Accounting 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