Essay about Madoff Securities

1405 Words Jan 19th, 2014 6 Pages
Assignment 1: Madoff Securities

Abstract
In the case of Bernie Madoff this is perfect example of how unethical behavior can turn into corruption. Madoff, a former investment and stock broker, was formally introduced to the world as the 'sole' operator in the largest Ponzi scheme on record. Madoff turned his financial management company into a colossal Ponzi scheme that swindled billions, from thousands of his investors. In this paper we determine the regulatory oversight that was in place while the Ponzi scheme was operating, and speculate on the main reasons why they did not discover the scheme, we’ll look at investing in Madoff Securities and how to expose the potential fraud.
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The auditor's report states that no material misstatements are present. The investors, creditors, and other users of the financial statements (and auditor's report) will rely on this information. The lawsuit is for billions of dollars and if the group is successful, the amount of the potential judgment would literally run the company out of business. In this Case the company was be forced to shut down. The independent firm of auditor gains knowledge of this event. The auditor has a legal obligation, due to the material nature of the event, to take responsibility in reporting the event appropriately, so that the users of the financial statements are aware of this event. (http://faculty research.edhec.com),(http://www.cnbc.com/)
Predict the way in which a peer review of Friehling and Horowitz would have uncovered the scheme related to Madoff Securities. First the right fundamental audit procedures were in place BMIS was audited by a small accounting firm called Friehling and Horowitz but according to the SEC alleges that Friehling merely pretended to conduct minimal audit procedures of certain accounts to make it seem like he was conducting an audit, and then failed to document his purported findings and conclusions as required under GAAS. According to the SEC's complaint, Friehling similarly did not conduct any audit procedures with respect to BMIS internal controls, and had no basis to represent that BMIS had no material

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