Investors, beware: Audits won't protect you from the likes of Madoff

Last week, David Friehling, the auditor who had purportedly handled Bernie Madoff's books for years, pleaded guilty to nine charges having to with his auditing work, or lack thereof. The charges included securities fraud, investment adviser fraud, false filings with the SEC and obstructing or impeding tax laws. Pointedly, the accountant denied knowing anything about Madoff's Ponzi scheme that cost investors billions.

Friehling operated Friehling & Horowitz, CPA's, P.C. as a solo practitioner and audited Bernard L. Madoff' Investment Securities from 1991 through 2008. Madoff paid Friehling a whopping $12,000 to $14,500 per month for auditing services from 2004 to 2007. Yet according to the government, Friehling didn't do much auditing. But even if he had, my experience as a fraud examiner and forensic accountant leads me to believe he might not have necessarily uncovered the fraud.