Bernard Madoff was convicted in 2009 of running a Ponzi scheme, the biggest in U.S. history. A Ponzi scheme is essentially the process of taking money from new investors on a regular basis and using the cash to pay promised returns to existing investors. The high and steady returns received by existing investors are the attraction for new investors, but they are not real returns from investments.
As long as new investors keep contributing and existing investors do not seek redemptions, or the return of their money, the scheme continues. However, eventually, as in the Madoff situation, circumstances change, the scheme is discovered, and the remaining investors find that their capital has disappeared.
At age 71, Madoff was sentenced to prison for 150 years and will die in jail. Now that Madoff is behind bars, attention has turned to Madoff's auditor, David G. Friehling. Friehling is accused of creating false and fraudulent audited financial statements for Madoff's firm, Bernard L. Madoff Investment Securities LLC. Prosecutors allege that these fraudulent reports covered the period from the early 1990s to the end of 2008.
Required
(a) Research the progress of the case against David Friehling. Write a report explaining his alleged role in the Madoff Ponzi scheme and the current (at the time you write your report) state of the legal action against him.
(b) Friehling was subject to U.S. auditing standards and legislation. Explain if, and how, Friehling's alleged actions would violate Canadian auditing standards and professional ethics.