Auditing Article 1 - Accounting firms drawn in to Madoff...

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Accounting firms drawn in to Madoff scandal By James Mackintosh Published: December 18 2008 13:11 | Last updated: December 18 2008 13:11 Top accounting firms were hoodwinked by Bernard Madoff ’s alleged $50bn fraud as well as several leading banks and some of the world’s biggest hedge fund investors, according to lists of service providers to Madoff- linked funds. PwC, KPMG and Ernst & Young, three of the “big four” accountants, and an arm of BDO International, the fifth largest, were all auditors of the feeder funds which channelled money into accounts at Mr Madoff’s New York brokerage. Mr Madoff, who has been charged with fraud and electronically tagged, told investigators his business was “one big lie”, according to prosecutors. The head of the US brokerage industry’s compensation scheme said records at Bernard L Madoff Investment Securities were “certainly falsified”. Several investors have said they took comfort from the presence of big, recognised accountants as auditors of the feeder funds, as well as from the registration of Madoff Securities with the Securities and Exchange Commission, the US market regulator. The SEC is now reviewing its own failure to investigate warnings alleging “financial wrongdoing” by Madoff. The New York Law School became the first Madoff victim to target an accountant this week when it named BDO Seidman in a lawsuit alongside Ezra Merkin and his Ascot Partners fund, which invested almost all its money with Madoff and was audited by BDO. Auditors of funds typically confirm with custodians that assets exist as stated, but Mr Madoff insisted clients make Madoff Securities custodian for assets, according to several people familiar with his terms. Other banks listed by feeder funds as custodian – including HSBC, which acted for several, and Bank of New York – appear to have been responsible only for moving assets between jurisdictions. According to fund documents seen by the Financial Times, PwC was auditor of Fairfield Sentry, the $7.3bn
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This note was uploaded on 11/05/2011 for the course ACCOUNTING 101 taught by Professor Online during the Spring '11 term at Colorado Technical University.

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Auditing Article 1 - Accounting firms drawn in to Madoff...

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