NEW YORK (Reuters) - The main trade organization for U.S. accountants has begun an ethics investigation into the small accounting firm that supposedly signed off on the books of Bernard Madoff’s investment management business.
“We’ve initiated a preliminary ethics investigation,” William Roberts, a spokesman for The American Institute of CPAs, said on Friday.
The firm, Friehling & Horowitz, has not responded to requests for comment this week, after Rockland County (New York) District Attorney Thomas Zugibe said the firm was being investigated for whether its independent auditor reports were fraudulent.
AICPA’s Roberts said Friehling & Horowitz told AICPA that it was not doing audits for any company. Roberts said that although the firm was enrolled in the peer review program, it has not undergone a professional review in 15 years.
U.S. authorities have said Madoff confessed to a $50 billion fraud (33 billion pound) after telling senior employees at his company that his money management operations were “all just one big lie” and “basically, a giant Ponzi scheme.”
Madoff, 70, was arrested on December 11. His firm, Bernard L. Madoff Investment Securities, is currently under receivership. Madoff is under house arrest.
The AICPA requires accounting firms to undergo peer review if they are performing audits, to ensure the firms are meeting applicable professional standards.
David Friehling is the only active certified public accountant at the three-person firm, according to New York state records. The records show that Jerome Horowitz, the other partner in the firm, is inactive and living in Florida.
“It appears that he (Friehling) did an audit of Madoff’s investment advisory, while he was telling us that he didn’t do audits and therefore wasn’t subject to the normal professional reviews that audit firms are required to have,” Roberts said.
Reporting by Emily Chasan