Bernard Madoff was convicted in 2009 of running a Ponzi Scheme, the biggest in US 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. Madoffs auditor, David G. Friehling was also the subject of attention from the investigators. Friehling was accused of creating false and fraudulent audited financial reports for Madoffs firm, Bernard L. Madoff Investment Securities LLC. Prosecutors alleged that these fraudulent reports covered the period from the early 1990s to the end of 2008.

Required

Explain and provide examples of how, Friehlings alleged actions specifically would violate

professional ethics (i.e., APES 110) (around 100 words, worth 2 marks

b. Friehling was subject to U.S. auditing standards and legislation. Explain if, and how, Frichling's alleged actions would violate Canadian auditing standards and professional ethics. Sources: Dionne Searcey and Amir Efrati. "Sins and Admission: Getting into Top Prisons." The Wall Street Journal: Europe 17-19, July 2009, p. 29; Chad Bray and Amir Efrati. "Madoff Ex-Auditor Set to Waive Indictment." The Wall Street Journal: Europe 17-19, July 2009, p. 29