NVIDIA Corp. (ticker = NVDA) Client Acceptance Study

Introduction:

Assume that you are a new partner at a large audit firm, which is looking to expand its client base. The firm is evaluating your performance based in part on your ability to find new audit clients, particularly those that appear to be in the growth sector. The firm is looking to expand into high-tech industries, but is wary of adding very risky clients to its audit portfolio. You heard the news that NVIDIA, one of the major graphics processor manufacturers in the world, has a good potential to grow in the high-tech sector. You also read a business article that the GPU industry has a solid prospect, with an increased demand for gaming devices and various alternative currency mining operations. You decide to check into the companys operations. NVIDIAs annual report paints a very positive picture of the companys prospects, and you think that this company may be a good opportunity for your firm. You mention the idea to the managing partner (a.k.a. CEO), and he/she asks you to perform a feasibility study of the NVIDIA account. Based on your recommendations, the firm will decide if it wants to commit the resources to go after NVIDIA.

Required:

3. Client Risk Assessment. Present the strengths of NVIDIA as well as potential red flags or risk factors that may be present in auditing NVIDIA. Use the information regarding client acceptance (ch.3) & inherent risk assessment (ch.4) in your textbook as a guide, and also the discussion of earnings management and fraud risk assessment as discussed in class. Present this information in terms of pros and cons of accepting the engagement.