Madoff Securities Case Summary
Madoff used funds earned during summer of 1860 to establish Bernnard L.Madoff Investment Securites LLC after graduating. Madoff made the securities democratized as well as reduced transaction cost, and was the one of the first brokerage firms to use computers to speed up the transaction. The firm developed fast because of the large trading volume and the impressive growth made it to be the largest “market maker” on the NASDAQ. Even knowledgeable people didn’t know the strategies Madoff used to maintain the consistent return. However, on December 10, 2008, Bernie Madoff told his two sons that the impressive growth was fraudulent, which named “Ponzi scheme”. This fraud was known as one of the largest in the history, and also influenced the stability of global stock markets, and as a result, the subprime mortgage crisis happened in the United States. However, as the auditor of Madoff Securities, Friehling & Horowitz Accounting firm should also be responsible for this fraud because it holds nearly $15 million investment funds in the account of Madoff. What’s more, David Friehling was the only professional auditor in the firm instead of auditing team to serve Madoff, which impaired the independence of the auditors. Harry Markopolos conducted one page length report based on the specific problems of fraud. First, Madoff refused to allow the Big Four auditors to review the financial statements. Second, Madoff was only audited by one-man accounting company. Third Madoff refused to provide the online access to the account to the clients. In another aspect, the reasons why the fraud was unchecked these years, the targeted investors don’t question the strategy, and the regulatory failed to oversight of the stock market.