Deloitte & Touche, LLP performed annual audits of National Century Financial Enterprises, Inc.’s (NCFE)1 financial statements from 1999 through 2001. Robert Harbrecht was the audit engagement partner and Brian Spires was the audit engagement manager. NCFE, a private healthcare finance company in the United States, used subsidiaries to issue a note offering to private institutional investors. Trust indentures required NCFE to use the note proceeds to purchase healthcare receivables specific to patients. It was important that NCFE use the proceeds to purchase only high quality healthcare receivables from highly rated providers, such as insurance companies, since the note offerings were an asset backed security. This restriction on the use of the note proceeds helped to safeguard these note holders’ investments. Harbrecht signed the 2000 unqualified auditor’s report based on NCFE’s financial statements. This case addresses three areas relating to the 2000 audit: (1) existence of accounts receivable, (2) valuation of accounts receivable, and (3) required disclosures.
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