SEC Fees Report on the Violating of Auditor Independence by FTX Auditors
Legal investigation of FTX auditor Prager Metis was begun by the US SEC.
Prager Metis, a public accounting and consulting business, is under investigation by the US Securities and Exchange Commission (SEC) for allegedly violating auditor independence guidelines and inciting customers to violate federal securities laws.
The SEC said on September 29 that Prager Metis had provided auditing services to its customers while violating the auditor independence framework by acting as an agent of its clients. According to reports, the system made illegal “indemnification provisions in engagement letters” for over 200 audits between December 2017 and October 2020. In addition, the statement said,
“Despite being told many times by Prager’s senior partners that including indemnification clauses in engagement letters made Prager not independent, the SEC says that Prager continued to sign engagement letters with those clauses and also put out “accountant’s reports” in which it said it was independent for its audits and exams.”
Therefore, by failing to adequately direct its customers, Prager has aided and abetted them in violating federal securities laws. Authorities found that a sizable number of auditees’ clients had broken the law by included the auditor’s “accountant’s reports” in their SEC filings. Even after being warned by the Public Company Accounting Oversight Board, Prager still did not tell clients of the legislation.
The auditor has been charged with violations and helping others in violations by the SEC. The head of the SEC’s Miami office, Eric I. Bustillo, stressed again how important it is for auditors to be independent, pointing out that it helps “protect the integrity of financial reporting and promote public trust.”
Even though the SEC hasn’t named any specific Prager customers, it’s obvious that the bankrupt FTX is one of them. A earlier court filing from November 2022 states that Prager conducted an audit of both FTX and FTX US.