US moves to close Madoff audit loophole

Bernard Madoff

A bill has been introduced in the US to expand regulation of small auditors
in the wake of the alleged $50bn (£37bn) fraud by financier Bernard Madoff.

Congressman Paul Kanjorski’s bill aims to close a loophole that allowed
Madoff’s small auditing firm, Friehling & Horowitz, to avoid scrutiny by the
US Public Company Accounting Oversight Board.

The bill would give the PCAOB authority to inspect, examine and discipline
auditors of all broker-dealers, not just those who are publicly listed.

Kanjorski – a Republican who is chairman of the financial services
subcommittee on capital markets, insurance, and government-sponsored enterprises
– said: ‘If this legal loophole had not existed Bernard Madoff’s storefront
auditing company would have had to register with the PCAOB.

‘Inspection and examination of Mr Madoff’s accountant by the PCAOB could have
identified his Ponzi scheme much earlier,’ Kanjorski added.

Last December, Madoff, a former chairman of the NASDAQ stock market, was
arrested for an alleged $50bn fraud. He is accused of running a Ponzi scheme – a
system whereby early investors are paid off with the money of new clients.