Discuss your thoughts on Madoff's auditor and the lack of awareness any regulators had that such a large company was audited by a sole-practitioner firm. Why did that happen? Could it happen again? Consider that Madoff was a "service provider" to various companies that outsourced investment activities to Madoff. If the auditors of "feeder firms" had adequately investigated Madoff as a third party service provider (formerly covered under SAS 70, now under the attest standards), would the Madoff fraud have been uncovered?© BrainMass Inc. brainmass.com June 4, 2020, 5:12 am ad1c9bdddf
First, why did this happen?
There were several reasons. First, Madoff was intimidating to regulators. They did come out and review his firm but he confused the junior agents that arrived and told them they were just not smart or sophisticated enough to understand his models. They were intimidated by his ways and amazing record. He was a legend and it was tough to outsmart him. Second, the auditor did not disclose to the AICPA that he was auditing so the auditor was not subject to peer review. This "under the radar" practice kept the peers in the profession from being able to ...
Your discussion is 419 words breaks this down into three questions that are answered individually: First, why did this happen? Second, could this happen again? Finally, if the auditors of the feeder firms had verified the audit quality of the service provider, could the fraud have been uncovered?