Essay on Audit and Investment Securities

The Auditor, an instructional novella written by James K. Loebbecke, tells the story of Jack Butler, a man from the San Francisco Bay area, who goes to college, majors in accounting, and goes to work for a large accounting firm referred to as “The Firm.” The story is loosely based upon the real world experiences of the author, and is written to give students a look into the world of public accounting that goes beyond a textbook. The Auditor not only gives students a chance to follow Jack Butler’s journey up the company ladder at The Firm, but also reiterates the relative importance of conventional lessons learned in school.

Portfolio management is an important factor that determines the performance of the portfolio. To perform well in the portfolio, it is not only essential to develop personal investment strategies, but analyzing current financial trend is also vital. Stock Trak is an online portfolio simulation that allows students to try out different investment strategies, and also get a hand on experience in what the real market trading conditions are. By managing the portfolio, I have acquired some new knowledge of investment strategies and also become more familiar with the current market by following closely to the financial headlines.

The most prominent indicators of fraud would have to be Madoff’s internal audits. There had to be some type of pay off with the audit. There was no way that Madoff could have passed the tax audition and impose the question on the SEC internal system. Another indicator, during the time of his scheme, would be why his company’s financial reports were never made public. The fraud could have been prevented if the SEC would have protected investors’ interest and should have been under a tighter government inspection. The government also has to fund SEC enough to investigate the case before the damage had been made. If the government would have funded SEC enough money and were to be able to investigate, then they would have saw red flags immediately. They also would have known that Madoff never invested any of his money. Instead, he transferred money from one bank to the other. The last indicator would be the return of investment was higher than it usually was.

Without a question the BOD should have placed a high degree of reliance on Andersen, which at the time was one of the most prestigious worldwide accounting firms. The auditors should have known the kind of accounting taking place in Enron. In my opinion, Andersen knew, at least to some extent, the company’s financial condition. However, Enron was already too deep under water that blowing the whistle so late would have created problems for Andersen as well. According to the case, on 02/05/01, Andersen held internal meeting during which it addressed the company’s accounting from and oversight of the LJM partnership. Andersen never discussed these concerns with the Audit and Compliance Committee. Although the BOD has its faults, it should have been able to rely on Andersen’s work.

Since the auditors failed to do their job properly, they should be held liable for failing to plan and perform the audit to discover material fraud. The red flags the auditors should have picked up when conducting the audit included rapid growth, bank transfers and other accounts, the avoidance of confirming the insurance restoration jobs, consistency of all the invoices, extravagant life style, cash flow problems, and problems meeting loan payments. Also the auditors never looked at construction contracts, issues, and whether ZZZZ Best had the necessary permits to do the work. This shows the auditors failed to exercise professional skepticism.

9. In March 2009, Madoff pleaded guilty to eleven counts of fraud, money laundering, perjury, and theft; in June 2009, Madoff was sentenced to 150 years in federal prison. 10. Fraud charges are still pending against David Friehling; he faces a prison sentence of more than 100 years if convicted of those charges. 11. KPMG became the first of the Big Four firms to be sued as a result of the Madoff fraud; the lawsuit alleges that KPMG failed to properly investigate Friehling & Horowitz while auditing the financial statements of a large “feeder firm” in which the plaintiff was an investor. 12. The SEC has announced a series of reforms to prevent or detect future frauds similar to Madoff’s; one proposal is that investment advisers be subjected to annual “surprise audits” to ensure that customer funds are properly safeguarded.

Looking back it’s easy to see the mistakes made by the investors of Bernard Madoff, how he got the rich and famous to foolishly invest their money with very little or no due diligence. He made the return of 10 to 12 percent annually look so good that investors begged to be included. Who wanted want to be a part of the impenetrable financial products or the better than average returns offered by Mr. Madoff. Sadly, if investors had

Simply put, too many immediate members of Bernie Madoff’s family maintained controlling positions, and none of them could be held accountable by anyone else employed by the firm. This rampant nepotism created a wall of operational secrecy, which often proved to be impenetrable even by close associates to the Madoff’s. The only accountant for this firm was this not a red flag, enough for everyone to want to check his background out and request for an outside audit on this person. www.huffingtonpost.com/2008/12/15/bernie-madoff-ponzi-scheme_n_151018html.

Per Liz Moyer, “How Regulators Missed Madoff,” regulators blamed limited resources, a lack of coordination between agencies, and fragmented oversight for letting Madoff operate for so long undetected. Moyer also goes on to list these steps Madoff took to elude regulators: He provided advisory services but did not charge a management fee; and His broker-dealer never had customer accounts, which allowed them to execute order flow for other broker-dealers and then trading for its own accounts. Apparently, the SEC was under staffed and incapable of uncovering fa fraud of this magnitude, while they were able to uncover other frauds on a smaller scale (while still substantial at $370 million). Madoff also failed to register his firm as an investment advisor until 2006, resulting in the SEC never investigating the firm as such. They dropped the ball on the not pursuing potential red flags, particularly ones the arose when it was learned that Madoff kept assets in the firm’s own custody and utilized a small auditing firm to sign off the books (Moyer, n.d.)

When the Madoff Victim Fund began accepting claims from these third-party investors in 2013, it was overwhelmed by how many it got - over 52,000 in total.” (36,000 Madoff Victims Have Not Received a Dime in Restitution; 1,129 Fully Reimbursed, 2014).”The only consistent message here is that the U.S. financial regulatory structure is just as bad at delivering fraud restitution as it is at detecting fraud. When the news of the Madoff fraud first gained media attention around the world in December of 2008, there was widespread criticism of the structural failure of the U.S. financial regulatory system, particularly the SEC – which had not only ignored detailed, written warnings from professionals like Harry Markopolos and others that Madoff was running a Ponzi scheme but the SEC had actually closed investigations into Madoff’s operations and then shredded the evidence it had collected. Why did it take over five years to learn that 36,000 Madoff claimants have not received a dime of restitution? Why was JPMorgan Chase, which was charged with two felonies for aiding and abetting the Madoff fraud, given a deferred prosecution

. Fraud occurs when someone acts with the intent to cause damage by misrepresentation. Negligence, however, is failing to act in a way that any reasonable person would in the same situation. Fraud and negligence are both considered torts because they are a civil wrong, which is when one does wrong to another person, and as a result you can sue for their actions. In Mona’s case she was clearly negligent for the audit reports and preparing the financial statements for Cardozo Corporation because she was not aware of the situation or the bank in this case and she did not have the intent to deceive. The verdict was decided in the Barclays Bank v. Grant Thornton case. In this case the auditors were accused for negligence in the production for the company, of non statutory audit reports given to third

For the month of December, I was given an assignment consisting of $100,000 and four stocks to invest in. My four stocks were The Ralph Lauren Corp., Visa Inc., Master card Inc. and The Chevron Corp. As stated I was given a month to record my data and I ended up with a total capital gain of $5,518.36 for the one month period for my investments. I have to thank you Mr. Acker, this project was not difficult, but it did confuse me. Receiving this assignment scared me in a way, because I didn’t know what I was getting into. The finance world is scary and tricky, one minute the market is doing good and other days it would be low. While calculating my capital gains or losses I thought I would lose a larger

It can fairly be said that an Investor considering an investment decision (whether to purchase, sell or hold stock) in publicly traded company acts on the basis of extensive information which is available by corporation to him until the last moment of his investing decision and try to determine the fair price of corporate stock. In the light of continuous creation of a particular impression of corporate affairs by the corporation, new information by corporate can vanish the importance of previous available information to investor. In the scenario only one kind of investors can get advantage over others, who is either very close to corporate operation (corporate officers) or can access nonpublic price-sensitive information to corporation

Securities regulations began in 1933 as a reaction to securities market violations. Securities regulations are a balance of investor and issuer interests. Regulations have typically been enacted in reaction to a violation that affects many, including issuers, investors, and the public. These regulations are not only created in reaction to violations, but the legislature also attempts to take a bigger step in prevention of the same violation reoccurring, as well as preventing a violation that has yet to occur. In other words, securities regulations have always been on a mission to stay one step ahead of securities violations from both issuers and investors. Regulations tend to tighten the rules to ensure investors and issuers do not have

What type of financial investments would you invest in if you were given 10,000 dollars, what made you choose these investments, as well as; how did your choices affect your decision as to tracking these financial investments through the usage of financial strategies and trends. While finding the right pecuniary investment to finance in is never an easy decision, one must first do their research as to what type of financial resources are available on the market to invest in; then apply those financial decisions and strategies to their financial market plan. Let’s begin with what a financial market does, “financial markets perform a vital function: they transfer funds from savers (individuals and organizations willing to defer using some