Please read the"Bernard L. Madoff: The Fraud of the Century" case study (C37 inthe Case Study section near the end of textbook).
Required:
After reading thecase, please respond to the following questions:
- Under the fundamental principles governing an audit covered inChapter 2, we learned that auditors are required to exercise duecare and maintain professional skepticism throughout the audit.Based on the case information, do you believe that the auditorsfrom Friehling & Horowitz exercised due care and maintainedprofessional skepticism throughout the audit? Why or why not?
- After the Madoff case, the SEC instituted a number of reformsto its operations. Please visit the SEC's website (www.sec.gov(Links to an external site.)Links to an external site.) and searchfor Post-Madoff reforms. Next, please identify the two reforms thatyou believe will have the best chance of detecting illegal activitysuch as the activities of Madoff. Make sure to providejustification for your choices.
- Consider section 24 of the Securities Act of 1933 and section32 of the Securities Exchange Act of 1934 (see Module C in Part IIIof textbook). Based on the case information, do you believe thatMadoff's auditor, Friehling, should be facing criminal charges? Whyor why not?
