Accounting Case Analysis

molex Case Analysis

Case 1

1. Why do Molex have to hire an external auditor?

2. What factors do you think influenced management's decision not to raise the issue

with the auditor's?

3. As a member of Molex's board, what would you do to respond to the auditors' request

that the CFO (and possibly the CEO) be replaced?

Case 2

1. Analyze New Century's business model:

a). Identify the subprime loan origination and securitization process.

b). What is the nature of competition in the sub-prime mortgage origination business?

c). Key aspects of New Century's business model

d). What was New Century's financial strategy?

2. Identify New Century's risks and accounting practices - whole loan sales,

securitization as sales, and securitization as financings.

a). What were the risks to loan sales and securitizations?

b). What were the key accounting estimates that New Century needed to make for sales

risks?

c). What were the key drivers of these estimates and how these key drivers trending?

d). What was the result of the company's accounting problems?

3. Why did New Century failed?

a). Based on information in the case, what is your assessment of the quality of oversight

provided by NFC's board ? Do you think it should be blamed for the accounting

failures at company?

b). Why do you think the accounting failures at New Century went undetected for so long

despite all the changes in governance in the post-SOX era?

c). What are the general lessons, if any that the NCF case provides for boards and audit

committees.

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