By Chris Prentice
(Reuters) -The U.S. Securities and Exchange Commission on Friday sued accounting firm Prager Metis for alleged auditor independence violations related to a template it used when signing on clients.
Between December 2017 and October 2020, Prager Metis improperly added indemnification provisions to engagement letters to clients for more than 200 audits and other work, the SEC said. This prevented the firm from having the independence required by law, it said.
Prager Metis in a statement said it always acted with independence from clients and intends to “vigorously defend itself” in court.
“These allegations arise solely from template indemnification language used several years ago that was never enforced or sought to be enforced, and the SEC does not allege this language affected the quality of our audits,” the statement said. “Prager takes its independence obligations seriously.”
Prager Metis continued to sign engagement letters with those provisions even after firm staff were aware of the issue, the SEC said.
Prager Metis was one of the auditors for the FTX Group, according to a court filing. The SEC’s allegations do not relate to the FTX matter
Crypto exchange FTX filed for bankruptcy in late 2022 and the U.S. government later accused FTX, its founder and key executives of a sweeping fraud scheme. Founder Sam Bankman-Fried’s trial begins next week.
The SEC’s complaint, filed against Prager Metis CPAs and its professional services firm, was filed in the U.S. District Court for the Southern District of Florida.
The SEC said it is seeking an injunction and penalties, among other things, and its investigation into Prager Metis is ongoing.
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