includes the wonderful quote
"It is not the responsibility of the accountant for a capital management firm to audit the underlying investments of the firms it invests in," says Fornelli. "The auditor is not in a position to test the existence of the underlying securities — especially in a fund-of-funds situation."
This is a definition of 'auditor' with which, for example, Emperor Gregor would not immediately concur; I would have assumed that, had the auditor the slightest uncertainty as to the existence of the underlying securities, he would be obliged to bring this to the attention of men in blue hats with stripes on their shoulders.
I'm also not altogether sure what the investors in 'Ascot, which was managed by GMAC chairman J. Ezra Melkin and invested all its money with Madoff, [losing] a reported $1.8 billion' could have been thinking - I can barely understand the argument for funds-of-funds, but a fund whose sole purpose in life is to invest in a single other fund only makes sense to me as a mechanism for delivering money to Mr Melkin while appearing to be investing it.
There seem to be an awful lot of people involved in this who need a training course of the form "Now, here are some pins, and here is a big pot of water, and if you look under these rocks you may find a whelk ..."