SEC files charges against Prager Metis CPAs for auditor integrity violations

SEC files charges against Prager Metis CPAs for auditor integrity violations

The SEC has filed charges against world accounting firm Prager Metis CPAs for a variety of auditor independence violations and purportedly contributing to its clients' breach of federal securities laws.

Prager Metis served as a auditor for the FTX Group 2021 crypto exchange, and current FTX CEO John Ray III has previously expressed significant apprehensions about the accuracy of information in the audits conducted by the firm.

The violations mentioned in the filings were reportedly spanning from December 2017 to October 2020, and the SEC has not directly mentioned FTX in the filing.

Prager Metis said in a statement that it intends to 'vigorously defend itself in court'. The company added: ''It is a good company,'' adding that the company is aiming to invest in the world's largest construction company.

The SEC alleges that Prager Metis incorporated indemnification provisions in over 200 audits, reviews, and exams - a practice that reportedly compromises auditor independence according to federal securities laws.

In the filing, the agency said: The regulation wrote that: 'It is clear that we are going to be able to make a significant step in addressing this matter'.

These provisions were allegedly continued, despite senior partners at Prager Metis warning that such inclusion impaired their independent status. Many of these reports were included in the SEC filings, and Prager Metis allegedly forgot to inform its clients of the violations.

Senators Elizabeth Warren and Ron Wyden have also raised questions about Prager Metis' objectivity, speculating that the firm was more as an advocate for the crypto industry rather than maintaining impartiality.

The SEC's lawsuit, filed in the United States District Court for the Southern District of Florida, seeks a permanent injunction, disgorgement plus prejudgment interest, and a civil monetary penalty against Prager Metis.

The ongoing investigation by the SEC underscores the agency's dedication to safeguarding financial reporting integrity and enforcing auditor independence to enhance public trust.

The case demonstrates the crucial role of auditor independence in securing investor protection and preserving the reliability of financial disclosures, especially in industries such as cryptocurrency, which are under increased scrutiny.