Bernie Madoff Ponzi Scheme Essay

Bernie Madoff Ponzi Scheme Essay.

Bernie Madoff was a legend on Wall Street. His success grew very quickly and he built a trading powerhouse named Bernard L. Madoff Investment Securities that was founded in 1960. He enjoyed telling employees, peers, and friends that his enterprise started on the Pacific Ocean beaches in Long Beach, CA as a lifeguard. Madoff enjoyed leading his company, chairing the NASDAQ board, and presenting to traders as a leader in the industry sharing his tips, tricks, and lessons learned. By 2000, his company had become very popular and was commonly used by hedge funds, wealthy investors, and institutions.

Bernard L. Madoff Investment Securities had been successful for over 20 years that was worth nearly $65 billion at the time when the success had been identified as fraud. Madoff and team had set up a flourishing Ponzi scheme. A Ponzi scheme “is a fraudulent investment operation that pays returns to separate investors from their own money or money paid by subsequent investors, rather than any actual profit earned.

” This type of investment strategy is doomed from the start because there is never a plan to completely recoup the investor’s money; however, to the investor it seems like a good investment because it promised a higher short-term return.

Madoff’s Ponzi scheme had been a well crafted game and each move including precise calculations. As the authorities began to investigate the scandal they found that individuals, institutional investors, and securities authorities had been involved. Madoff and team created a group of financial managers to work with potential investors to sell the fraud. This group was an uneducated and inexperienced staff that was tasked to “generate false and fraudulent documents” that were used to disguise these unethical business transactions.

These documents including trade blotters and monthly account statements were created using historical stock data from the Internet. In order to appear to have a thriving business, Madoff’s team began to wire funds from the New York and London offices to uphold the impression of Wall Street financial success. In reality there was very little stock bought and sold. Instead, the market was studied and the company pretended to purchase stock whose trajectories were in line with the firm’s goals.

Bernard L. Madoff Investment Securities had been reviewed by the U. S. Securities and Exchange Commission (SEC) and recorded two reports of suspicious behavior and financial reporting starting in 1999. However, the company had never been fully investigated until after the discovery of the Ponzi scheme. Madoff himself stated that it was a miracle that this plan wasn’t discovered because it was obvious when reviewing Wall Street’s central clearinghouse account which would have brought red flags. While leading this scheme, Madoff kept this unethical activity close; he only incorporated his family members and a few key accomplices including Frank DiPascali.

The success of this investor and legendary financial mentor has been named the largest financial investor fraud in history and the most successful Ponzi scheme to date. On July 14, Madoff began serving his sentence in Burtner Federal Correctional Complex. In addition to the 150 year sentence awarded to Madoff by the courts, they also called for $170 billion in assets from Madoff. This number was calculated and represented the amount of money that moved through the unlawful bank accounts during the years of fraudulent behavior.

As Judge Denny Chin sentenced Bernie Madoff, he called these crimes “extraordinarily evil”. However, the question is not “Was Madoff extraordinarily evil? ” because the answer to that question is simply yes. The real ethical question is “Who enabled Madoff to successfully complete these evil and unethical acts? ” That person was Madoff’s right hand man, Frank DiPascali. In 1975, college dropout and 19 year old Frank DiPascali joined Bernard L. Madoff Investment Securities, LLC (BMIS) following recruitment by his neighbor from Queens and Madoff’s longtime personal secretary Annette Bongiorno.

Despite his lack of a college education or any formal financial training, over his 33 years with Madoff’s New York firm DiPascali became a key lieutenant to Madoff, rising from a research analyst to serve in roles such as Director of Options Trading and Chief Financial Officer. While it is unclear to investigators whether Madoff ever ran a legitimate investment business, Madoff claimed in court that the Ponzi scheme only began in 1991 and thereafter did not involve legitimate investment activities.

In court testimony, DiPascali recounted that by the early 990’s, he knew the investment operation was fraudulent saying, “No purchases or sales of securities were actually taking place. It was all fake; it was fictitious. It was wrong, and I knew it was wrong at the time. ” As the primary deputy to Madoff, Frank DiPascali had a unique position of managing the massive fraud concocted by his boss. Through the two decades that the Ponzi scheme ran, DiPascali only cemented himself further in dishonesty rather than extracting himself from, or informing authorities of, the fraud.

DiPascali told Judge Richard Sullivan that while receiving orders and executing the fraud, he “knew it was criminal, and I did it anyway. ” In 2006 when the firm’s computer programmers Jerome O’Hara and George Perez refused to continue running the software that produced the fictitious trades and statements, DiPascali joined Madoff in learning how to run the software to continue the fraud and paying the programmers off for their silence. Besides Madoff, DiPascali was the only other person to run the infamous 17th floor operation at BMIS, where fraudulent transactions and account statements were produced for investors.

DiPascali has credited his loyalty to Madoff as the primary reason he continued to participate in the fraud. “I was loyal to him,” DiPascali said. “I ended up being loyal to a terrible, terrible fault. ” As DiPascali phrased it during a court hearing, “by 1990 or so, Bernie Madoff was a mentor to me and a lot more. ” Frank DiPascali’s attorney, Marc Mukasey, asserted that DiPascali operated with the belief that before the Ponzi scheme could collapse; Madoff would be able to repay investors and erase any fraud.

DiPascali reportedly had such confidence in Madoff’s great personal wealth that he believed no matter what, investors could be protected. However, DiPascali enjoyed generous compensation while directing the fraudulent investing operation. DiPascali’s salary from BMIS topped $2 million per year and from 2002 through 2008 DiPascali had a fictitious investor account at BMIS named after his yacht, Dorothy Jo, from which he personally withdrew over $5 million. DiPascali also used his BMIS corporate platinum American Express card to fund vacations, entertainment, and other personal expenses.

While Frank DiPascali did not conceive of the Ponzi scheme himself, he was second to none in actually managing the details of the fraud. The criminal complaint to which DiPascali plead guilty in August 2009 states, “DiPascali designed, developed and oversaw a wide and varying array of fictitious books and records – all prepared to conceal the scheme from investors, auditors and regulators. ” In addition to managing the backroom activities and generating false account records, DiPascali regularly spoke with clients and lied about their investment accounts.

Bernie Madoff Ponzi Scheme Essay

Fraud and Internal Control at Bern Fly Company Essay

Fraud and Internal Control at Bern Fly Company Essay.

This scheme gives the opportunity for the salespersons to get very easy money by simply making fake orders and then cancelling them once they got the commission for that order. They can even act in collusion with the cash disbursement clerk at the disbursement department and this way, without the control of a person of a higher level on the echelon within the company, this fraud can never be detected. The solution in this situation is simply the segregation of duties, that is orders should not go directly to the cash disbursements department but should go through an internal control process first.

The cash disbursements department must be only the final stage of the chain when everything was found to be correct and the cash disbursement is permitted by the control department. What’s more, the afterlife of the order should not be left out of consideration either, as it marks out from the description of the task that the product returns are extremely high which in fact offset the high sales figures of the salespersons and decrease the company’s profit.

In this case we should check if this high rate of returned products is caused by the not adequate quality of the products, in which case the salespersons deserve the commission of the sales activity, or it is caused by the fraudulent acts of the salespersons, in which case they don’t deserve it and actions have to be taken to stop this practice. We can also see some imperfections in the method of the expense reimbursements. The way, that the salespersons hand in their expenses on a hard copy and they are accepted and paid promptly without any control over them, gives the chance for the salespersons to commit fraud again.

The simplest way of it is to hand in a hard-copy spreadsheet which includes higher charges than the person’s real expenses that occurred during the sales process. This matter can be fairly easily handled by asking the persons to prove their expenses with receipts and bills instead of simply presenting them on a spreadsheet filled in by themselves. Also that system is quite questionable that the clerk accepting the spreadsheet of expenses is the same person who decides about the disbursement and also the same person who implements the disbursement.

The above mentioned segregation of duties should be applied in this area, too, the roles should be separated between more independent persons of different levels of the echelon. If these changes are not brought into effect, the firm will keep lying under the danger of being defrauded by its employees. Even the most honest employees can give in to temptation if the bad system used by the firm allows them to commit a fraud and get easy money without the risk of getting caught.

The technical literature calls this the ‘fraud triangle’, which is a theory about the reasons that can lead to fraudulent behaviour. This theory consists of three components which together can lead to occupational fraud. They are pressure (e. g. having some financial problem), opportunity (e. g. being in a position within the company where it is of minimal risk to be caught) and rationalization (which means that the person committing the crime gives himself a rational explanation why it is acceptable what he is doing).

Fraud and Internal Control at Bern Fly Company Essay

Acc 556 Essay

Acc 556 Essay.

Faculty and students/learners will be held responsible for understanding and adhering to all policies contained within the following two documents: •University policies: You must be logged into the student website to view this document. •Instructor policies: This document is posted in the Course Materials forum. University policies are subject to change. Be sure to read the policies at the beginning of each class. Policies may be slightly different depending on the modality in which you attend class. If you have recently changed modalities, read the policies governing your current class modality.

Course Materials Louwers, T. J. , Ramsay, R. J. , Sinason, D. H. , & Strawser, J. R. , & Thibodeau, J. C. (2011). Auditing & assurance services (4th ed. ). New York, NY: McGraw-Hill/Irwin. Mulford, C. W. , & Comiskey, E. E. (2002). The financial numbers game: Detecting creative accounting practices. New York, NY: John Wiley & Sons. Silverstone, H. , & Sheetz, M. (2007). Forensic accounting and fraud investigation for non-experts (2nd ed. ). Pearson. Singleton, T.

W. , Singleton, A. J. (2010). Fraud auditing and forensic accounting (4th ed. ).

Hoboken, NJ: John Wiley & Sons. Wells, J. (2011). Principles of fraud examination (3rd ed. ). Hoboken, NJ: Wiley. All electronic materials are available on the student website. Supplemental Resources Apollo Shoes Casebook Web-Based Version http://highered. mcgraw-hill. com/sites/0078136644/student_view0/apollo_shoes_case. html Week One: Overview of Fraud and Abuse DetailsDuePoints Objectives1. 1Identify the impact of occupational fraud and abuse on the organization. 1. 2Describe U. S. governmental oversight of accounting fraud and abuse. 1. Define categories of corruption. 1. 4Assess the types of accounting evidence. ReadingRead the section “Fraud Examination Methodology” in Ch. 1 of Principles of Fraud Examination. ReadingRead Ch. 10 of Principles of Fraud Examination. ReadingRead Ch. 16 of Principles of Fraud Examination. ReadingRead Ch. 4 of The Financial Numbers Game. ReadingRead Ch. 11 of Fraud Auditing and Forensic Accounting. ParticipationParticipate in class discussion. See Policies2 Discussion QuestionsRespond to weekly discussion questions. DQ1 – Day 2 DQ2 – Day 4 DQ3 – Day 62 Individual

Internal Accountant’s Report to ManagementYou are the internal accountant at a company that is preparing for an upcoming government contract bid. The management in your company is deciding if it is necessary for the company to perform a full financial status review prior to the bid. As an internal accountant, prepare a report for management that provides supporting information for a full financial status review prior to the bid. Write a paper of no more than 1,050 words that includes the following sections: •Section I: The effect of occupational fraud and abuse on the company •Section II: U. S. overnmental oversight of accounting fraud and abuse and its effect on the company •Section III: Potential corruption schemes to be aware of in the company •Section IV: Recommendation of types of accounting evidence and methods of gathering such evidence to support the financial status review Format your paper consistent with APA guidelines. Day 714 Week Two: Forensic Evidence DetailsDuePoints Objectives2. 1Explain procedures for collecting accounting evidence. 2. 2Explain the use of sampling in performing an examination. 2. 3Evaluate accounting evidence using analytical and inferential tools. ReadingRead Ch. of Forensic Accounting and Fraud Investigation for Non-Experts. ReadingRead Ch. 9 of Forensic Accounting and Fraud Investigation for Non-Experts. ReadingRead Ch. 10 of Forensic Accounting and Fraud Investigation for Non-Experts. ReadingRead Ch. 11 of Forensic Accounting and Fraud Investigation for Non-Experts. ReadingRead Ch. 12 of Forensic Accounting and Fraud Investigation for Non-Experts. ReadingRead Module E of Auditing & Assurance Services. ReadingRead Module F of Auditing & Assurance Services. ReadingRead Module G of Auditing & Assurance Services. ReadingRead the Apollo Shoes Casebook Road Map.

ReadingReview the Apollo Shoes Casebook. ParticipationParticipate in class discussion. See Policies1. 5 Discussion QuestionsRespond to weekly discussion questions. DQ1 – Day 2 DQ2 – Day 4 DQ3 – Day 61. 5 Individual Procedures in Collecting Forensic EvidenceAs corporate controller for Apollo Shoes, you are tasked to find and explain any irregularities in the Apollo Shoes Case. Resource: Apollo Shoes Casebook Define the process you will use and address the following questions: •What procedures will you use to collect accounting evidence? •What sampling tools and techniques will you use for the examination? How will you use analytical and inferential tools to evaluate accounting evidence? Submit your assignment to the facilitator. Note. APA formatting is not required for this assignment. Use a title and reference page where appropriate. Consider using a checklist or flowchart to outline your process. Day 78 Learning Team Weekly ReflectionDiscuss this week’s objectives with your team. Your discussion should include the topics you feel comfortable with, any topics you struggled with, and how the weekly topics relate to application in your field. Prepare a 350- to 1,050-word paper detailing the findings of your discussion.

Day 71 Week Three: Substantive Procedures for Cash Outflow Irregularities DetailsDuePoints Objectives3. 1Design substantive procedures for detecting irregularities in cash. 3. 2Design substantive procedures for detecting irregularities in accounts payable. 3. 3Design substantive procedures for detecting irregularities in payroll. ReadingsRead Ch. 2 of Principles of Fraud Examination. ReadingsRead Ch. 3 of Principles of Fraud Examination. ReadingsRead Ch. 5 of Principles of Fraud Examination. ReadingsRead Ch. 6 of Principles of Fraud Examination. ReadingsRead Ch. 7 of Principles of Fraud Examination. ReadingsRead Ch. of Principles of Fraud Examination. ReadingsRead the sections “Audit Programs” & “Audit Procedures for Obtaining Audit Evidence” in Ch. 3 of Auditing & Assurance Services. ReadingsReview the Apollo Shoes Casebook. ParticipationParticipate in class discussion. See Policies1. 5 Discussion QuestionsRespond to weekly discussion questions. DQ1 – Day 2 DQ2 – Day 4 DQ3 – Day 61. 5 Individual CPA Examination ReviewResource: Week Three Student Guide Access the Wiley CPA Examination Review website from the link on the student website. Use the Week Three Student Guide to complete the Wiley CPA Examination assignment. Day 72 Learning Team

Substantive Procedures for Cash Outflow IrregularitiesResource: Apollo Shoes Casebook Outline substantive procedures by using the Apollo Shoes Casebook for detecting irregularities in each of the following audit cycles: •Cash •Accounts payable •Payroll Design an audit program for the cycle in no more than 1,050 words. Consider using a checklist or flowchart to outline your process. Format your audit program consistent with APA guidelines. Day 712 Week Four: Substantive Procedures for Cash Asset Irregularities DetailsDuePoints Objectives4. 1Design substantive procedures for detecting irregularities in accounts receivable. 4. Design substantive procedures for detecting inventory irregularities. 4. 3Design substantive procedures for detecting irregularities in fixed assets. ReadingsRead Ch. 4 of Principles of Fraud Examination. ReadingsRead Ch. 9 of Principles of Fraud Examination. ReadingsRead Ch. 7 of The Financial Numbers Game: Detecting Creative Accounting Practices. ReadingsReview the Apollo Shoes Casebook. ParticipationParticipate in class discussion. See Policies1. 5 Discussion QuestionsRespond to weekly discussion questions. DQ1 – Day 2 DQ2 – Day 4 DQ3 – Day 61. 5 Learning Team Substantive Procedures for Asset IrregularitiesResource: Apollo Shoes Casebook

Outline substantive procedures by using the Apollo Shoes Casebook for detecting irregularities in each of the following audit cycles: •Accounts receivable •Inventory •Fixed assets Design an audit program for the cycle in no more than 1,050 words. Consider using a checklist or flowchart to outline your process. Format your audit program consistent with APA guidelines. Day 711 Week Five: Financial Statement Fraud DetailsDuePoints Objectives5. 1Analyze the relationship between financial accounting principles and fraud. 5. 2Analyze schemes used in financial statement fraud. ReadingsRead Ch. 11 of Principles of Fraud Examination.

ReadingsRead Ch. 12 of Principles of Fraud Examination. ReadingsReview the Apollo Shoes Casebook. ParticipationParticipate in class discussion. See Policies1. 5 Discussion QuestionsRespond to weekly discussion questions. DQ1 – Day 2 DQ2 – Day 4 DQ3 – Day 61. 5 Individual Financial Statement Fraud SchemesYou are the investigator assigned to Apollo Shoes. Based on the nature of the company and the evidence provided to you, you must determine which financial statement fraud schemes would likely be present in the company. Resource: Apollo Shoes Casebook Identify potential financial statement fraud schemes by using the Apollo Shoes Casebook.

Describe the types of evidence you would look for to determine whether fraud is occurring. Write a business brief of no more than 1,050 words that outlines how you will use the substantive procedures discussed in Weeks Three and Four to analyze potential schemes. Format your business brief consistent with APA guidelines. Day 720 Learning Team Weekly ReflectionDiscuss this week’s objectives with your team. Your discussion should include the topics you feel comfortable with, any topics you struggled with, and how the weekly topics relate to application in your field. Prepare a 350- to 1,050-word paper detailing the findings of your discussion.

Day 71 Week Six: Examination Reporting DetailsDuePoints Objective6. 1Create documentation to present investigation findings. ReadingsRead Ch. 13 of Forensic Accounting and Fraud Investigation for Non-Experts. ReadingsRead the section “Attestation Engagements” in Module A of Auditing & Assurance Services. ParticipationParticipate in class discussion. See Policies2 Discussion QuestionsRespond to weekly discussion questions. DQ1 – Day 2 DQ2 – Day 4 DQ3 – Day 62 Individual CPA Examination ReviewResource: Week Six Student Road Map Access the Wiley CPA Examination Review website from the link on the student website.

Use the Week Six Student Guide to complete the Wiley CPA Examination assignment. Day 72 Individual Report on Financial Statement Fraud SchemeResource: Ch. 12 of Principles of Fraud Examination Choose one of the following financial fraud scheme cases from Ch. 12 of Principles of Fraud Examination. (You may also choose a fraud scheme case that is not in the text, with instructor approval. ) •Case Study: That Way Lies Madness •Case Study: The Importance of Timing •Case Study: All on the Surface Write a letter or memo in no more than 1,050 words to the organization’s management and communicate the examination findings explained in the case.

Refer to this week’s assigned readings for assistance with formatting a letter or memo to management. Include the following in your letter or memo: •A summary of the matter under investigation •The scope of the examination •A summary of conclusions •The factors that aided the examination •The limitations on the examination Format your assignment consistent with APA guidelines. Day 78 Learning Team Weekly ReflectionDiscuss this week’s objectives with your team. Your discussion should include the topics you feel comfortable with, any topics you struggled with, and how the weekly topics relate to application in your field.

Prepare a 350- to 1,050-word paper detailing the findings of your discussion. Day 71 Copyright University of Phoenix® is a registered trademark of Apollo Group, Inc. in the United States and/or other countries. Microsoft®, Windows®, and Windows NT® are registered trademarks of Microsoft Corporation in the United States and/or other countries. All other company and product names are trademarks or registered trademarks of their respective companies. Use of these marks is not intended to imply endorsement, sponsorship, or affiliation. Edited in accordance with University of Phoenix® editorial standards and practices.

Acc 556 Essay

ACC 497 Case Study 1-49 Essay

ACC 497 Case Study 1-49 Essay.

An audit by the IRS was done on Mr. John Gemstone, a wealthy client. A few deductions were questioned, such as; $10,000 loss on beach rental, $20,000 charitable contribution, $15,000 loss for operation of cattle breeding ranch. There was a concern that the battle breeding ranch is not a legitimate business, which is more like a hobby. My supervisor was asked that I represent Mr. Gemstone in his discussions with the IRS. In order to get elaborate more on Mr.

Gemstones deductions, we would need more specifics: •For the charitable contribution painting, we feel that the painting may be overvalued.

Was there an expert that actually came out and viewed the painting to give a professional and honest value of $20,000? Where is the proof? Can we go based on your word? If I said, the Mona Lisa painting was $1; would you believe that in fact the painting is valued at $1? What record do you have to provide to us that the painting is valued at ,000? •Now, Mr.

Gemstone claims that he has a business of cattle breeding. Are you registered as an individual to be breeding cattle? Where are you documents for your land that you are in fact breeding these cattle on your property? How are you keeping track of the money that you have invested and the revenue coming in from breeding these cattle? Do you have a permit showing that these cattle can be breed on your property? •In the loss deduction of the rental of your beach cottage? What happened with the beach cottage?

What do you have to prove that this can be included in your tax return? Tax research is the search for the best defensibly correct solution to a problem involving either a completed transaction or a proposed transaction, according to Federal Taxation (2011). We must determine the following: •Determine the facts •Identify the issues •Identify and Analyze the tax law sources •Evaluate non-tax implications •Solve the problem •Then communicate the findings with the client. In Mr.

Gemstones case, stated in Section 280A, a loss is not a deductible if the taxpayer used the residence, such as the beach house, for personal purposes for longer or greater of 14 days or 10% of the number of days the unit was rented at a fair rental value. Property is deemed to be used by the taxpayer for personal purposes on any days on which it is definition of family members. According to the IRS, an individual can deduct a charitable contribution made to, or for the use of, any of the following organizations that otherwise are qualified under section 170(c) of the IRS codes.

However, there are limitations of deductions. The 50% limitations apply to all public charities, all private operating foundations (code POF), certain private foundations that distribute the contributions they receive to public charities and private operations foundations within 2 ? months following the year receipt and lastly to certain private foundations the contributions to which are pooled in a common fund and the income and corpus of which are paid to public charities.

ACC 497 Case Study 1-49 Essay