The U.S. SEC has filed charges towards international accounting agency Prager Metis CPAs for a mess of alleged auditor independence violations and purportedly contributing to its shoppers’ breaches of federal securities legal guidelines.
Prager Metis served because the auditor for the now-bankrupt cryptocurrency trade FTX Group 2021, and present FTX CEO John Ray III has beforehand expressed important apprehensions in regards to the validity of data within the audits carried out by the agency.
Nevertheless, the violations talked about within the filings reportedly spanned from December 2017 to October 2020, and the SEC has indirectly talked about FTX within the submitting.
Prager Metis informed Reuters in a press release that it intends to “vigorously defend itself in court docket.” The agency added:
“These allegations come up solely from template indemnification language used a number of years in the past that was by no means enforced or sought to be enforced, and the SEC doesn’t allege this language affected the standard of our audits.”
The SEC claims that Prager Metis integrated indemnification provisions in engagement letters in over 200 audits, evaluations, and exams — a apply that reportedly compromises auditor independence in accordance with federal securities legal guidelines.
The regulator wrote within the submitting:
“As alleged in our criticism, over a interval of almost three years, Prager’s audits, evaluations, and exams fell wanting these basic rules. Our criticism is a vital reminder that auditor independence is essential to investor safety.”
These provisions have been allegedly continued, regardless of senior companions at Prager Metis being alerted that such inclusion impaired their unbiased standing. Many of those experiences have been included in filings with the SEC, and Prager Metis allegedly uncared for to tell its shoppers of the violations.
U.S. Senators Elizabeth Warren and Ron Wyden have additionally aired worries concerning Prager Metis’ objectivity, speculating that the agency acted extra as an advocate for the crypto business relatively than sustaining impartiality.
The SEC’s authorized criticism, lodged within the U.S. District Courtroom for the Southern District of Florida, is in search of a everlasting injunction, disgorgement plus prejudgment curiosity, and a civil financial penalty towards Prager Metis for the alleged violations.
The continuing investigation by the SEC underscores the company’s dedication to sustaining the integrity of economic reporting and implementing auditor independence to bolster public belief.
The case is a reminder of the essential position of auditor independence in securing investor safety and sustaining the reliability of economic disclosures, particularly in industries comparable to cryptocurrency, that are underneath elevated scrutiny.
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