While most of the American media focused much of the past week on where Mitt Romney invested his money, or exactly what his role was at Bain Capital a decade and a half ago, another major financial scandal has hit the American financial markets with little to no fanfare.

For the second time in less than a year, a large Futures Commission Merchant (FCM) has collapsed after firm officials stole customer money to fund business operations and their exorbitant lifestyles. 

With last week's collapse of Peregrine Financial, the U.S. Congress should be asking, "Do any of the field examiners and their managers at the Commodity Futures Trading Commission (CFTC) have any clue what they are doing, particularly since they signed off on the firm's financial statements as recently as January 2012?"

Peregrine collapsed after its founder could no longer hide his theft of approximately $200 million in customer funds.  In a detailed suicide note outlined in Russell Wasendorf, Sr.'s federal arrest affidavit, he admitted he was able to fool incompetent government regulators for a period of twenty years using nothing more than a post office box, a scanner, Photoshop, Excel, and an inkjet printer.

As a certified public accountant (CPA), I am stupefied at the sheer lack of sophistication used in this fraud.  As a taxpayer, I am horrified by the absolute lack of competence or pure laziness exhibited by regulators at the CFTC.

According to the arrest affidavit, this fraud was perpetrated by Mr. Wasendorf's ability to do nothing more than create and pass off fictitious bank statements to government regulators.  It was really that simple.

Unfortunately for the CFTC, the level of simplicity is exactly why this should never have occurred.

In any entry-level audit course, students are taught to use "professional skepticism" with regard to all aspects of an audit.  In this case, the CFTC clearly failed to live up to this mantra.

The indications that fraud was likely occurring at Peregrine were about as numerous as grains of sand at a beach.

First, Mr. Wasendorf was the only person allowed to see firm bank statements at Peregrine.  Moreover, all such bank correspondence was to be directed to him, and all bank letters were to be delivered to his office unopened.

Mr. Wasendorf was also the only person at Peregrine allowed to interact with any person from their bank (US Bank).  In addition, he was the only person in the entire firm allowed to have access to their online banking portal.

These simple facts should have been known to any regulatory auditors doing their job.  As part of any audit, auditors are supposed to interview multiple sources from inside and outside the firm in an effort to document the firm's internal controls.  Had this simple process been done just one time in the past 20 years, this fraud would not have been able to be carried out for as long as it did.

In response to this scandal, the typical chorus by media pundits, CFTC administrators, and members of Congress have surfaced: the CFTC is underfunded.  More money needs to be spent on regulation.  We need to tighten regulations.

All of this talk is pure poppycock...if the CFTC is only going to collect monthly financial statements as nothing more than an apparent "rubber-stamp process" without reviewing a firm's internal controls, then no amount of money allocated by Congress would ever prevent others from committing similar types of fraud.

Instead, Congress should insist that the CFTC clean the ranks of its field staff and remove anyone who is not legitimately qualified to conduct a financial audit.  In other words, unless you are a CPA, are a certified fraud examiner (CFE), or have a degree in accounting with significant real-world audit experience (in which case you probably are a CPA), you likely have no business conducting regulatory field audits.  Moreover, as is the practice in private audit firms, all field regulators should have actual knowledge about the futures industry before being allowed to conduct field reviews -- because simply having a professional designation is not sufficient for selecting qualified field audit team members.

With the collapse of MF Global in October 2011 (which should have been a wake-up call to the CFTC) and now Peregrine, the days of filing field regulatory positions with lawyers simply because they have law degrees, or with career CFTC bureaucrats because they've been around a long time, must end.  Moreover, the CFTC's entire leadership starting with Chairman Gary Gensler should be replaced -- because the agency under his leadership apparently lacks the ability to prevent firms from misallocating and stealing customer funds.

A failure to clean house at the CFTC will only further erode what remains of the confidence the general public has in our financial markets.  And if things don't change at the CFTC and other government financial regulatory agencies, it won't be long before we again are reading about a con game perpetuated over an extended period of time with the apparent "full approval" of the government agency who is supposed to be in charge of regulation.

Paul B. Matthews is a certified public accountant (CPA) and was formerly a licensed commodities broker.  He can be followed on Twitter at Paul4TexasHouse.