What was the name of the scheme used in this fraud?
The Ponzi Scheme
100
Who were the people who revealed the scheme?
Who were the people who revealed the scheme? Madoff's sons Mark and Andrew
100
Who was the sole proprietor of the only auditing firm Madoff hired?
What is David G. Friehling
200
Explain how the 3 main accounting principles broken in the fraud.
Cost principle: Assets were not recorded at the correct cost, the value was inflated.
Revaluation model:The value of the assets were not changed to match the market condition.
Matching principle: The expenses were did not reflect the revenue it helped created.
200
What is the name of the building the fraud took place in?
What is The Lipstick Building
200
Approximately how much money was lost by the stakeholders?
What is 65 billion dollars
300
Explain briefly how does the scheme work.
One investor’s money is used to pay another
300
In what ways are the investors impacted by this scheme?
Losing large sums of money they invested, as there was no investment really going on. Just the shifting of money from one investor to another.
300
Name two procedures the auditor(s) failed to do.
What is they did not verify the accounts where the dollars of Madoff’s client flowed, they did not check the assets, and they failed to confirm liabilities related to the clients accounts
400
Why was it possible for Madoff to continue his fraud over such a long period of time?
Continuous funding fees from investors. Mainly J. Ezra Merkin, Walter Noel/Fairfield Greenwich Group, Sonja Kohn/Bank Medici
400
In which decade is it thought that Madoff started to use his illegal practises?
What is the 1990's
400
Name three accounting principles that were violated.
What is the cost principle, the revaluation model, and the matching principle
500
How does the economic crisis in 2008 contribute to the revelation of the fraud?
Investors started to ask for their money back, and realized Madoff was unable to pay them back
500
How has power in this situation amplified the drive to perform the scheme?
Madoff pressured his employees into cooperating in the fraud. It might have been out of fear, or a sense of belonging.
500
What are four precautions you can take to prevent from being fooled by investors?
What is double check statements, input of company's own money, test account, become familiar with investment strategy, verified by a reputable third party