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Compose a 1250 words essay on Auditing. Needs to be plagiarism free!Bernard Madoff had been able to dupe thousands of investors across the world through the famous Ponzi scheme (The Wall Street Journa
Compose a 1250 words essay on Auditing. Needs to be plagiarism free!
Bernard Madoff had been able to dupe thousands of investors across the world through the famous Ponzi scheme (The Wall Street Journal, 2009). The company had been keeping its investment strategies secrets for years which already hinted at the fact that there is something significantly wrong going on behind the closed doors of Madoff Securities in the Wall Street. A proper investigation of how a company can give such abnormally high returns to its investors for years may have exposed the Ponzi scheme earlier. One of the main reasons why the Ponzi scheme had not been detected from external sources is that the high returns from the financial schemes offered by Madoff Securities incited greed among the general people which often made them invest blindly in these schemes. Also, the oversight on the part of the regulators of the capital markets added to the factor of Ponzi scheme going undetected for years.
For a firm which has invested in Madoff Securities, the materiality of the investments made by the company in Madoff Securities should be evaluated and established by the auditors of the investing firm. Also, the nature and amount of transactions should have been evaluated carefully. There would be associated risks of the possibility of material misstatement of the company being reported in the consolidated financial statements and the financial reports of the company. The auditors should also evaluate the risk assessment capabilities of the investing firm and take steps to detect any fraudulent reporting of the investing company in their financial reports caused by the investments in Madoff Securities. The key audit procedures included in the Audit Sections should be followed in this case. These would include a calculation of the fair value of the investments, performance of analytical procedures, inspection of the supporting documentations done for subsequent settlement or realization of the investments
