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    <p>Prager Metis, one of the auditors that took care of the books for FTX — and had office space in the metaverse — has had a complaint filed against it for failing to follow rules for certified public accountants. These include getting indemnification clauses so that it wasn’t legally bound to the audits, attestations, and reviews it was providing.</p> 
    <p>During this time, the accounting firm took in millions of dollars from dozens of different engagements that were improperly conducted, and while this spells bad news for Prager Metis, it could imply that a far bigger shoe has yet to drop for the accounting industry as a whole.</p> 
    <h2 class="wp-block-heading" id="the-sec-is-moving-against-auditors">The SEC is moving against auditors</h2> 
    <p>This action against <a rel="noopener noreferrer nofollow" title="Prager Metis" href="https://thebittimes.com/tag/prager-metis.html">Prager Metis</a> isn’t the first time the government regulator has taken on an <a rel="noopener noreferrer nofollow" title="audit" href="https://thebittimes.com/tag/audit.html">audit</a>or this year. In June, the <a rel="noopener noreferrer nofollow" title="SEC" href="https://thebittimes.com/tag/sec.html">SEC</a> settled with Marcum LLP over its “control deficiencies” in regard to SPACs (Special Purpose Acquisition Companies). Marcum took on roughly 600 different SPACs as their <a rel="noopener noreferrer nofollow" title="audit" href="https://thebittimes.com/tag/audit.html">audit</a>or, with 25-50% of those <a rel="noopener noreferrer nofollow" title="audit" href="https://thebittimes.com/tag/audit.html">audit</a>s showing violations from the <a rel="noopener noreferrer nofollow" title="audit" href="https://thebittimes.com/tag/audit.html">audit</a>or. For the 150-300 penalized <a rel="noopener noreferrer nofollow" title="audit" href="https://thebittimes.com/tag/audit.html">audit</a>s Marcum was ordered to pay a fine of $10 million.</p> 
    <p>However, the <a rel="noopener noreferrer nofollow" title="Prager Metis" href="https://thebittimes.com/tag/prager-metis.html">Prager Metis</a> complaint is pushing for more than a relatively small fine for the <a rel="noopener noreferrer nofollow" title="audit" href="https://thebittimes.com/tag/audit.html">audit</a>or. Indeed, it’s asking for a permanent injunction from violating the laws and rules that have already been broken, a disgorgement of ill-gotten gains, and civil monetary penalties.</p> 
    <p>According to Francine McKenna, a lecturer at Wharton School of Business and former auditor, <strong>“an indemnification clause in the engagement contract is absolutely forbidden and has been forbidden forever.”</strong></p> 
    <p>“It violates every tenet of being an auditor,” she said.</p> 
    <h2 class="wp-block-heading" id="clarity-on-indemnification">Clarity on indemnification</h2> 
    <p>Indemnification simply means that an individual or company is protected against some sort of loss or legal action.</p> 
    <p>While indemnification clauses are quite common in certain contracts, terms of service, or other obligations, they more or less render an <a rel="noopener noreferrer nofollow" title="audit" href="https://thebittimes.com/tag/audit.html">audit</a>, attestation, or review useless due to the fact that part of an <a rel="noopener noreferrer nofollow" title="audit" href="https://thebittimes.com/tag/audit.html">audit</a>or’s responsibility is to stand by the work it’s conducted in both a legal and financial sense. This is clearly seen in the downfall of Arthur Andersen after the revelation that Enron had disclosed false financials to it and the company had more or less gone along with it.</p> 
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        FTX bankruptcy: A complete failure, worse than Enron 
      </blockquote><iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" style="position: absolute; clip: rect(1px, 1px, 1px, 1px);" title="“FTX bankruptcy: A complete failure, worse than Enron” — Protos" src="https://protos.com/ftx-bankruptcy-a-complete-failure-worse-than-enron/embed/#?secret=kCF4bjbTv5#?secret=qL7v9qlu2w" data-secret="qL7v9qlu2w" width="500" height="282" frameborder="0" marginwidth="0" marginheight="0" scrolling="no"></iframe> 
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    <p><em>Read more: Your guide to the Sam Bankman-Fried trial — starting today</em></p> 
    <h2 class="wp-block-heading" id="h-bigger-than-crypto">Bigger than crypto</h2> 
    <p>“This has nothing to do with crypto or FTX,” McKenna clarified, “it has do with the fact that they (Prager Metis) were growing and they were doing a lot of stuff that came under the jurisdiction of the PCAOB (Public Company Accounting Oversight Board).”</p> 
    <p>Prager Metis could indeed be one of many smaller-sized auditors that have included indemnification clauses in their auditing contracts, which could be part of the reason that it’s <strong>choosing to fight rather than settle with the SEC</strong>.</p> 
    <p>The concern with how smaller auditing firms are conducting themselves in the wake of the Global Financial Crisis seems to mirror the recent regional banking crisis in the US. Specifically, smaller firms taking on far more risk due to a lack of regulatory oversight and guidance. The ramifications have been harsh for both industries.</p> 
    <p>“Everybody’s greedy,” said McKenna, “they’re getting these audits as a stamp of approval… Prager Metis were taking on certain types of work, they got clients to indemnify them, everybody was happy with that arrangement, and that’s how they minimized the liability.”</p> 
    <p>Whether or not the Prager Metis complaint is a shot over the bow to the accounting industry or the beginning of a full-on regulatory assault has yet to be seen. Either way, <strong>it’s clear that auditors have a new reason to be spooked, namely their own shoddy work</strong>.</p> 
    <p><em>Quotes in bold are our emphasis. Got a tip? Send us an email or ProtonMail. For more informed news, follow us on&nbsp;X,&nbsp;Instagram,&nbsp;Bluesky, and&nbsp;Google News, or subscribe to our&nbsp;YouTube&nbsp;channel.</em></p> 
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<p>Source: <a rel="noopener noreferrer nofollow" target="_blank" href="https://thebittimes.com/accounting-apocalypse-ftx-auditor-prager-metis-sued-by-the-sec-tbt64953.html">https://thebittimes.com/accounting-apocalypse-ftx-auditor-prager-metis-sued-by-the-sec-tbt64953.html</a></p>

Accounting apocalypse: FTX auditor Prager Metis sued by the SEC

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