Madoff's Accountant Charged

The SEC had finally decided to take action against Madoff's accountant, David G. Friehling, for enabling Madoff's fraud.  

The SEC's complaint alleges that Friehling enabled Madoff's Ponzi scheme by falsely stating, in annual audit reports, that F&H audited BMIS financial statements pursuant to Generally Accepted Auditing Standards (GAAS), including the requirements to maintain auditor independence and perform audit procedures regarding custody of securities.

The SEC's position is that Friehling enabled Madoff's fraud by conducting an audit but not following accounting standards.  In other words, Friehling sold his accounting license to Madoff. 

Instead, the SEC alleges that Friehling merely pretended to conduct minimal audit procedures of certain accounts to make it seem like he was conducting an audit, and then failed to document his purported findings and conclusions as required under GAAS. If properly stated, those financial statements, along with BMIS related disclosures regarding reserve requirements, would have shown that BMIS owed tens of billions of dollars in additional liabilities to its customers and was therefore insolvent.

In other words, Friehling sold his accounting license to Madoff.