In 2009, Bernie Madoff was convicted of the largest Ponzi scheme in recent history. At the time, Madoff's auditor was David G. Friehling. He was accused of creating false and fraudulent audited financial reports for Madoff's firm, Bernard L. Madoff Investment Securities LLC. Prosecutors allege that these fraudulent reports covered the period from the early 1990's to the end of 2008.

Required, i

1) Based on the above, list the two most significant threats to independence. Give reasons for your choices (5 marks)

2) Discuss the audit responsibility David G. Friehling had to Bernie Madoff and describe how the auditor/client relationship was breached (5 marks)