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Accounting auditing and fraud
Madoff was a successiful entrepreneur who made use of computer technology in making trading systems more secure, efficient and cheap. Madoff used to visit Wall Street during early stages of life and wished he would become a leading player in the finance sector. In collaboration with other friends, Madoff organized the NASDAQ exchange, which ended up becoming the world’s largest electronic stock market. Other security agencies, like NYSE were forced to switch to electronic securities trading. Madoff fame came to an end after the federal authorities realized he was operating a 50-65 million U.S. dollars Ponzi scheme. Prior to his confession to the family in 2008, Madoff used the investments made by new clients in pay fictitious returns to fellow clients. This made both Madoff and his independent auditor face fraud charges. The following discussion relates to Madoff Securities International Limited fraud case and its implications on the nation’s financial reporting system (Knapp, 2013; 161-163).
The ineffectiveness of Friehling made Madoff securities sustain the financial fraud for so long. In addition, Madoff’s independent auditor, David Friehling, played a vital role in ignoring fraud checkups for decades. The results of poor audit management by Friehling have made the business fall under heavy scrutiny and face more challenges from the public. Friehling is liable for arrest by the federal prosecutors for flouting the accounting profession’s auditor independence rules. Moreover, Madoff’s independent auditor failed to subscribe to the AICPA code of conduct making him ignore most rules. Freihling failed in correcting the entity’s financial statements that were false when he had the authority to record the entity. In addition, the company violated the rules of performance and profession service by disclosure of confidential client information (International Federation of Accountants, 2013).
Madoff had had issue with Securities and Exchange Commission (SEC) since the financial statements that introduced fraud were stamped. In addition, Madoff had provided false information regarding his employees since the body came to realize that he had only one active accountant. Moreover, the failure by F.............
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