Ernst & Young Confronts Madoff's Specter in Trial Over Audits

[InfoSec News <alerts () infosecnews org>]

http://www.bloomberg.com/news/articles/2015-10-14/ernst-young-confronts-madoff-s-specter-in-trial-over-audits?cmpid=twtr1

By Sophia Pearson
Bloomberg.com
October 14, 2015

Ernst & Young LLP took Bernie Madoff at his word when it signed off on 
audits of a fund that helped feed the biggest Ponzi scheme in U.S. 
history.

The firm must now defend that decision at the first trial of an auditor 
over losses tied to Madoff, who’s serving a 150-year prison term for 
stealing billions of dollars from thousands of investors. FutureSelect 
Portfolio Management Inc., which lost $112 million in its investment in 
the feeder fund, says Ernst & Young was reckless in its review. The 
purported assets weren’t just exaggerated; they didn’t even exist, 
FutureSelect says.

Ernst & Young calls its sign-off reasonable based on generally accepted 
auditing standards, which the firm “scrupulously” followed. The case boils 
down to second-guessing a review that can provide only “reasonable 
assurance” that a client’s financial statements are correct, the firm 
says.

“No audit of a Madoff-advised fund could have detected this Ponzi scheme,” 
Amy Call Well, an Ernst & Young spokeswoman, said in an e-mailed 
statement. “EY was not the auditor of any Madoff entity, we were among the 
many auditors of funds that chose to use Madoff as their investment 
adviser.”

[...]

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