The negligence of audit firm Prager Metis in its audit of FTX deprived investors of critical protections, ultimately exposing them to the risk of collapse in one of the largest cryptocurrency scams in history.
The company agreed to pay $1.95 million to settle charges related to the FTX audit and separate violations of auditor independence. The SEC's action underscores the vital role of auditors as financial leaders.
Key Points
Auditing firm Prager Metis (website) has agreed to pay $1.95 million to settle SEC charges that it mishandled FTX's audit and violated auditor independence rules.
Prager issued false audit reports for FTX, claiming compliance with GAAS, but failed to assess the risks associated with FTX and Alameda Research.
The firm must now take corrective action, including hiring an independent consultant to review its audit policies.
Summary
Audit firm Prager Metis has reached a $1.95 million settlement with the SEC following allegations of negligence in its audit of collapsed cryptocurrency exchange FTX. According to the SEC, Prager issued two audit reports between 2021 and 2022 that falsely stated compliance with Generally Accepted Auditing Standards (GAAS). Prager did not acknowledge the heightened risks associated with the relationship between FTX and Alameda Research, a crypto hedge fund controlled by FTX's CEO.
The company agreed to pay fines and take corrective measures, including hiring an independent consultant to oversee audits and quality control procedures. The agreement also limits Prager's ability to take on new clients, and further investigation into the FTX audit is ongoing.
Compliance Information
This case highlights the critical role of auditors in maintaining market integrity, especially in the volatile world of crypto assets. The collapse of FTX highlighted the dangers of inadequate auditing, where failures can expose investors to fraud and poor management. The SEC is making it clear to audit professionals that audit independence and rigor are non-negotiable, especially when it comes to high-risk industries such as cryptocurrencies.
Call for information
FinTelegram is calling on insiders and whistleblowers in the auditing and financial sectors to provide additional information about negligent auditing practices, especially in the cryptocurrency space. Your information can play a key role in uncovering additional misconduct and protecting the interests of investors.
