Being a CPA is supposed to mean something more than being a hired gun, where the level of assurance depends on the fees the client is paying. There are some professional standards involved, as well as at least one Supreme Court case that opined that auditors of public companies have a higher duty than simply giving the kind of opinion the client deserves, based on engagement fees. In fact, that same Supreme Court opinion (U.S. v. Arthur Young) stated that the real client was the shareholders, not management.

Sorry the Army Military Police thing didn’t work out for you.

– Tenacious T.

Thinking about all the comments on litigation, the firms of course are going to try and protect their people because these are Partnerships not limited companies !!

(1) The CPA firms can’t argue that the feeder funds failed because of business conditions and subsequent events that couldn’t have been anticipated by the auditors.

(2) Markapolous’ book makes it clear that a lot of people on Wall Street who never even looked at Madoff’s books did not believe his returns. In other words, his consistent performance should have raised red flags to anyone who knew anything about the business of securities trading. There is no way any trader makes a profit month after month. Markapolous reveals that a lot of Wall Streeters thought that Madoff’s consistent performance resulted from earnings smoothing and that he was subsidizing his bad periods by taking funds he earned in his good periods.

(3) The investors might not have believed the returns if the CPA firms hadn’t signed off on their statements.

That being said, I think the feeder fund investors will have to settle for pennies on the dollar from the CPA firms.

This may lead to more regulation from a grandstanding congress, not all of which results in higher audit fees like Sarbanes. But even if it doesn’t hit the public radar, it will make life harder for the majority of accountants doing these audits, because making partners wealthy becomes even more difficult, with growing legal bills for our foul-ups. Add to this the reluctancy to pay seniors and managers, and the addition of more “check in the box” crap for the audit file that gives a perception, but not necessarily the reality of a better audit, and I think audit quality overall is bound to suffer.

Staying in business is great, but if our product deteriorates, that should concern everyone.