HOW AUDITORS MISSED MADOFF.

HOW AUDITORS MISSED MADOFF. There were many opportunities to catch Madoff. Brooke Masters and Greg Farrell had an article in the August 12 Financial Times which described one way that auditors missed the fraud. When auditors based in the United States asked Madoff who the counterparties were on some of his trades, Madoff dummied up documents which provided names of counterparties based in Europe. (There weren’t any counterparties because there weren’t any trades). If the auditors were based in Europe, they were given names of US counterparties. No auditor ever followed up with inquiries to the alleged counterparties. (This seems strange because through the years I have been asked by auditors to confirm the existence of very small transactions). Any inquiry would have shown that that the transaction didn’t exist.