In spite of his assertions that he carried-out fraud alone, convicted investment advisor Bernard Madoff's independent auditor is now under investigation. The auditor is accused of not doing his job. Rather than verify Madoff's company records, the F.B.I claims that he "rubber-stamped" the records. Knowing what you have learned about the importance of auditing, which of the following statements do you understand to be most accurate?
A)Investment firms should always hire private accountants. Public accountants do not have enough information about the firm to prepare audits.
B)Independent auditors only prepare audits for not-for-profit firms. Madoff hired the wrong professional for the job.
C)Independent auditors must follow strict rules, including new rules put in place by the Sarbanes-Oxley Act.
D)The Sarbanes-Oxley Act does not institute rules of practice for independent auditors. Independent auditors follow strict rules created by the AICPA, American Institute of Certified Public Accountants.

Question

Quizplus · Accepted Answer

Independent auditors are required to follow strict rules and regulations, including those put in place by the Sarbanes-Oxley Act. This ensures that auditors are held accountable for their work and cannot simply "rubber-stamp" company records without conducting a thorough review. Hiring a private accountant or only using auditors for not-for-profit firms are not relevant to the importance of auditing in this particular case. While the AICPA also sets standards for auditing, the Sarbanes-Oxley Act provides additional regulations that auditors must follow.

In Spite of His Assertions That He Carried-Out Fraud Alone