1. Which of the following is true given the fact that David Friehling, his firm and his family members had nearly $15 million invested with Madoff Securities
   1. Did not compromise independence since most of the money invested was made by his father-in-law Jerome Horowitz.
   2. Did not violate or compromise independence as Jerome Horowitz and Bernie Madoff went way back and new each other from the late 1960s.
   3. Clearly violated the independence requirement.
   4. Constituted a breach of independence in appearance but not in fact.

2. Friehling s audit of Madoff Securities could best be described as:
   1. Gross negligence to the infinite exponent.
   2. Simple negligence.
   3. Poor judgment.
   4. Having a bad day at the office.

3. Of the 29 red flags Harry Markopolos delivered to the SEC, the most incriminating one was:
   1. Madoffs returns to investors and his consistency of delivering them was too god to be true.
   2. His mathematical analysis that proved the options market did not have sufficient transaction volume to accommodate the huge number of options that Madoff would have had to make if he was really actively trading on behalf of his clients.
   3. The fact that Madoff Securities was audited by a single individual.
   4. Madoff clients could not follow their investment or statements online.