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What Does Madoff’s Auditor Say? No Answer

What Does Madoff’s Auditor Say? No Answer

by Toby Lucich on December 16, 2008

The tiny auditor of Bernard Madoff’s Wall Street firm, at the center of an alleged $50-billion Ponzi scheme, is being investigated by the district attorney in a New York City suburb.

Friehling & Horowitz had signed off on the annual financial statement for Bernard L. Madoff Investment Securities LLC, according to Bloomberg News.’s calls to the auditing firm’s headquarters in New City, N.Y., were not answered yesterday.

“We’re trying to determine if there have been any state crimes here,” Rockland County District Attorney Thomas Zugibe told Bloomberg in a telephone interview. “When you have a key player like that operating in your county, you have to look.”

What Does Madoff’s Auditor Say? No Answer

{ 4 comments… read them below or add one }

Anonymous February 7, 2009 at 3:10 am

All gatekeepers failed, because they trusted Madoff. There is an assumption – some VIPs are too famous, too intelligent to fail. But they continue to fail.

Do you remember what happened with the near collapse of the Long-Term Capital Management (LTCM), the hedge fund which used trading strategies such as fixed income arbitrage, statistical arbitrage, and pairs trading, combined with high leverage?

LTCM was founded by John Meriwether, the former vice-chairman and head of bond trading at Salomon Brothers. I admired two board members of the fund, Myron Scholes and Robert C. Merton. They shared the 1997 Nobel Memorial Prize in Economic Sciences. Could they fail?

If you admire somebody, do you really audit or challenge him, or you try to learn from him?

Some years before somebody told me that Air Force Intelligence is using a motto: “In God we trust, all others we monitor.” I had a good laugh out of it, looked funny, but today I do believe that they are right. I prefer the commercial version: “In God we trust, all others pay cash”

Auditors and gatekeepers should not admire or trust anybody. If somebody is very genius, it is likely he will use his intelligence to harm rather than help.

George Lekatis
President of the Sarbanes Oxley Compliance Professionals Association (SOXCPA

Anonymous July 16, 2009 at 1:59 pm

The Motto Madhoff used was "In god we trust in data we believe". He was giving investors enough data to fuel their interest.

The madoff case was exposed because of its size. If you look at the court cases on SEC's website there is plenty of evidence that ponzi schemes have been on the rise starting year 2000. Why did the SEC neglect to take action?

Anonymous August 31, 2009 at 12:07 pm

I think this just proves that is it the responsibility of the shareholders to request an audit if that kind of information is not willingly released. A company that is on the up and up will constantly be performing those kinds of engagements because it is so costly to fulfill those requests. As a shareholder in a couple companies, I look more to numbers and information than a figurehead to trust.

George Lekatis May 26, 2011 at 10:14 am

The proposed PCAOB Rules on Auditing Standards Related to the Auditor’s Assessment of and Response to Risk and Related Amendments to PCAOB Standards have been approved by the SEC.

The 8 new Auditing Standards could help.

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