Ponzi Scheme

1146 Words Nov 18th, 2012 5 Pages
Ponzi Scheme
Keller Graduate School
Forensics Accounting

The Bernie Madoff scam truly made history. Bernie Madoff probably would not have been able to prolong this scam without the continued help of the Accounting Firm of Friehling & Horowitz CPAs PC, who at last reported purported to audit financial statements and disclosures of Madoff firm for the last 17 years. Ponzi schemed to help Madoff by trying to go undetected because of Friehling deceiving investors and regulators by declaring that Madoff enterprise had clean audit records. Ponzi’s scheme enabled Madoff by falsely stating in annual audit reports that F & H audited Madoff financial statements pursuant to GAAP, including the requirements to maintain auditor
…show more content…
Federal regulators would just take a glance at the certification and never look at a file a second time; this is what allowed the biggest Ponzi scheme in the history to take place. Every year bankers and investment firms have to get audited, but the auditor is chosen by the firm itself and assigned by federal regulators. The way the audit is supposed to work is that the auditor can go into the cabinet files or wherever files are stored and they pick files in a random way.

The reality is different because all of the audits are very expensive. The auditors allow the investors and banking firms to pick the files to be audited and of course you can be assured that these files are the cleanest and most perfect ones of those firms. This systematic failure is what allowed Madoff scam with Friehling’s help to grow in leap and bounds. Madoff made sure that the more important investors were getting the promised returns and David Friehling used his accounting skills to cook the files (so to speak). There was $65 billion in (funny) funds and offices all over the world, South America, Europe and Asia and all came back to David Friehling certification for more than 17 years. Per Madoff himself, all would have been over in 2004 if federal regulators hand done their due diligence against them. Again, the scam

More about Ponzi Scheme

Open Document