Recognizing the Red Flags of a Ponzi Scheme

Even after Bernard L. Madoff pleaded guilty to operating a $65 billion Ponzi scheme, the fallout continues to spread, not only to direct investors but also to the auditors of funds that invested with Madoff. Investors in numerous funds were “fed” to Madoff, in some cases allegedly without the knowledge that Madoff was going to manage much or all of the funds. Now, investors are looking to the auditors of these funds for answers—in the form of class-action lawsuits.
This should serve as a wake-up call to the profession. What canaccountants do to protect themselves and their clients from thefar-reaching effects of Ponzi schemes in the future?