Question

Please read the "Bernard L. Madoff: The Fraud of the Century" case study (C37 in the Case Study section near the end of textbook).

Required:

After reading the case, please respond to the following questions:

1. Under the fundamental principles governing an audit covered in Chapter 2, we learned that auditors are required to exercise due care and maintain professional skepticism throughout the audit. Based on the case information, do you believe that the auditors from Friehling & Horowitz exercised due care and maintained professional skepticism throughout the audit? Why or why not?
2. After the Madoff case, the SEC instituted a number of reforms to its operations. Please visit the SEC's website (www.sec.gov (Links to an external site.)Links to an external site.) and search for Post-Madoff reforms. Next, please identify the two reforms that you believe will have the best chance of detecting illegal activity such as the activities of Madoff. Make sure to provide justification for your choices.
3. Consider section 24 of the Securities Act of 1933 and section 32 of the Securities Exchange Act of 1934 (see Module C in Part III of textbook). Based on the case information, do you believe that Madoff's auditor, Friehling, should be facing criminal charges? Why or why not?

Answer 1

Option 1: Company Fraud: An evaluative report
This course includes a Portfolio Project that is due at the end of the last week of the course. During this
first week of the course, be sure to review the Portfolio Project description on the Week 8 Assignment
page along with the Portfolio Project grading rubric, which can be accessed from the Course Information
page.
There are two (2) options to choose from, and the final Portfolio Project is due at the end of Week 8.
Choose only one (1) of the options to complete the Portfolio Project. Do not do both assignments.
Identify which assignment you are going to complete.
Each Portfolio Assignment option is a case study. During Week 2, you will submit a proposal to your
instructor identifying which case study you are going to do.
Option 2: Audit Simulation: Workpaper Preparation
This course includes a Portfolio Project that is due at the end of the last week of the course. During this
first week of the course, be sure to review the Portfolio Project description on the Week 8 Assignment
page along with the Portfolio Project grading rubric, which can be accessed from the Course Information
page.
There are two (2) options to complete the Portfolio Project which is due at the end of Week 8. Choose
only one (1) of the assignments to complete the Portfolio Project. Do not do both assignments. Identify
which assignment you are going to complete. Each Portfolio Assignment option is a case study. During
Week 2, you will submit a proposal to your instructor identifying which case study you are going to do.