Mohammed A Khan
Prof: Wendy Achilles
Course: Acc 562 Advanced Auditing
Since the ascent of money, different techniques have been developed and carried out to fool people of their assets. These methods have evolved together with advances in technology, and some have proved to be more efficient than other. One of the largest of these schemes ever carried out occurred in modern times in the United States, it was uncovered as recently as in late 2008. The man behind it managed to keep the scheme running for over 15 years in one of most monitored economic systems in the world. The man in charge of the operation, Bernard L. Madoff, got arrested for his scheme and pled guilty to the embezzling of billions of US dollars. It struck many as unimaginable how such a fraud could occur in an environment so carefully controlled by regulations and supervised by different institutions.
Determine the regulatory oversight that was in place while the Ponzi scheme was operating, and speculate on the main reasons why they did not discover the scheme.
Ponzi scheme defined by Investopedia as “A fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns for older investors by acquiring new investors. This scam actually yields the promised returns to earlier investors, as long as there are more new investors. These schemes usually collapse on themselves when the new investments stop.” There are two important regulatory oversight body had its presence while such Ponzi scheme was operated, 1) Securities and Exchange Commission and 2) External Auditor. The outside investors will get real information about a company through these two bodies. It is evident that one individual named Harry Markopolos complaints file several times with Securities and Exchange Commissions (SEC) regarding the violations of securities laws by Madoff.
References: 1. “The Madoff Case: A Timeline”. The Wall Street Journal. http://online.wsj.com/article/SB112966954231272304.html?mod=google news_wsj . 2. “Ponzi Scheme”: Investopedia. http://www.investopedia.com/terms/p /ponzischeme.asp#ixzz2D2ZfgzNC. 3. “The Man who figured out Madoff’s Scheme”. CBS News, http://www.cbsnews.com/stories /2009/02/27/60 minutes/main4833667.shtml. 4. Information retrieved from http://www.sec.gov about the Madoff security case. 5. Information retrieved www.economist.com/node/12818310 about the true story of madoff case.