Weird, huh? How do you think that happened? - Ed.
March 19 (Bloomberg) -- The arrest of Bernard Madoff’s accountant highlights the peril posed by bogus auditors at the heart of Ponzi schemes that have bilked investors out of billions of dollars.
David Friehling’s arrest for securities fraud yesterday followed at least four other cases this year in which money managers accused of defrauding clients created sham auditors or hired accountants not up to the job. Investors may have avoided about $74 billion in losses if they had examined, or just tried to shake hands with, accountants supposedly verifying the books.
“Due Diligence 101 should demand that you check out the auditing firm and find out if it exists,” said Richard Dietrich, an accounting professor at Ohio State University in Columbus. “Then, you have to find out if they are qualified.”
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