Accountants May Be Liable in Madoff Fraud

Experts say feeder funds obviously skimped on scrutiny
By Kevin Spak,  Newser Staff
Posted Feb 18, 2009 11:17 AM CST
A passerby is reflected in the office door of Friehling & Horowitz, CPA's in New City, NY. The firm was the outside auditor for Bernard Madoff.   (AP Photo/Craig Ruttle)
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(Newser) – The many accounting firms that missed Bernie Madoff’s massive scam could be in for a world of legal hurt, experts tell the Wall Street Journal. Madoff’s company was audited by a firm that had just one accountant, and one ex-SEC accountant finds it hard to believe that feeder-fund auditors checked his work. “If they didn’t, then investors will have to hold the auditor accountable,” she said.

Many firms declined to comment, saying they were already facing litigation. Others say their job was only to ensure that the numbers the firm gave out added up, not to check those figures for fraud. Some critics also lay the blame on the SEC, which suspended rules governing accountants for hedge funds and private financial partnerships. Madoff’s accountant wasn’t registered or peer-reviewed.