Review the Madoff Securities case below Write a four to five 4 5 page paper in which you Determine
Review the Madoff Securities case below.
Write a four to five (4-5) page paper in which you:
- 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.
- Assume you are an auditor for a firm that had $10 million dollars invested in Madoff Securities.
- Determine the fundamental audit procedures that you should have applied to this investment.
- Predict the way in which a peer review of Friehling and Horowitz would have uncovered the scheme related to Madoff Securities.
- Pretend you are Harry Markopolos and suggest one (1) strategy, different from that of the case study, to expose the potential fraud. Provide a rationale to support the suggestion.
- Analyze the role of the audit committee for Madoff Securities in regard to the discovery of Ponzi scheme, and suggest one (1) action the audit committee could have taken in order to prevent or detect the fraud. Provide a rationale to support the suggestion.
- Use at least two (2) quality academic resources in this assignment. Note: Wikipedia and similar type Websites do not qualify as academic resources.
Your assignment must follow these formatting requirements:
- Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.
- Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
Ponzi schemes are based on two fundamentals: trust and greed. The trust comes from building a relationship with the potential victims. Usually, in Ponzi schemes, the person perpetrating the fraud has gained trust through (a) direct, observable actions by others, (b) professional or other affiliations, or (c) through references by others. The greed comes from the investors who see an opportunity to obtain higher than usual gains, and because the trust is there, they do not perform their normal due diligence. Both trust and greed were prevalent in the Madoff scheme as described below.
In March 2009, Madoff pleaded guilty to 11 federal crimes and admitted to turning his wealth management business into a massive Ponzi scheme that defrauded thousands of investors of billions of dollars. Madoff said he began the Ponzi scheme in the early 1990s. However, federal investigators believe the fraud began as early as the 1980s, and that the investment operation may never have been legitimate. The amount missing from client accounts, including fabricated gains, was almost $65 billion. On June 29, 2009, he was sentenced to 150 years in prison, the maximum allowed.