Madoff scandal focus shifts to auditors
Details continue to unfold in the case against Bernard Madoff, 70, a New York based investment securities broker, was arrested Dec. 11 and charged with securities fraud for a Ponzi scheme that allegedly bilked investors of $50 billion. Allegations are now being made against the investment management firm’s small New York-based auditor, Friehling & Horowitz.
While Friehling & Horowitz is enrolled in the AICPA peer review program, reliable resources are reporting that the firm hasn’t submitted to a peer review for over 15 years. The firm has reportedly said that it didn’t perform any attest services and therefore was not subject to peer review. At this time, the firm is under investigation by the district attorney in Rockland County, N.Y., for potential violation of state laws.
New York is one of only six states that do not require firms to be peer reviewed. The New York State Senate passed legislation this week requiring peer review as a licensing requirement. The bill awaits the governor’s signature.
“I think this situation speaks volumes in favor of the peer review program,” said Glenn A. Roberts, CPA, OSCPA Peer Review Committee chair. “This fundamental breakdown should make it easier to pass peer review as a licensing and permit requirement in the remaining states.”
SEC Chairman Christopher Cox acknowledged that the SEC has failed multiple times in this case, having received credible and specific allegations against Madoff’s firm dating back to at least 1999. The SEC is conducting a full scale investigation into the allegations.
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LAST UPDATED 12/19/2008