Expert: SEC’s view on Prager Metis indemnity clauses ‘problematic’
By 
Adrianne Appel2023-10-18T17:00:00
Audit firms should carefully weigh the pros and cons of indemnity clauses in light of the Securities and Exchange Commission’s (SEC) recent complaint against Prager Metis.
Last month, the SEC charged Prager Metis with violating independence requirements of federal securities laws on 62 audits, 11 examinations, and 144 reviews, largely because the firm included indemnification provisions in 87 client engagement letters. The agency’s complaint, filed in U.S. District Court for the Southern District of Florida, is just the latest example of its enforcement focus on auditor independence.
The prudent path for auditors is not to use indemnity clauses in any way whatsoever, said Frank Borger Gilligan, a member of the corporate, mergers and acquisitions, and securities practice group at law firm Dickinson Wright.
Related articles
-
PremiumAuditor independence on regulators’ radars
The Public Company Accounting Oversight Board and Securities and Exchange Commission have emphasized in public statements auditor independence is a critical enforcement area, prompting the need for firms to reacquaint themselves with each agency’s requirements.
-
News BriefSEC accuses Prager Metis of hundreds of auditor independence violations
Accounting firm Prager Metis violated auditor independence rules through use of indemnification provisions in its engagement letters hundreds of times during a period of nearly three years, the Securities and Exchange Commission charged in a lawsuit.
-
News BriefSEC chief accountant eyeing auditor use of network member firms
The Securities and Exchange Commission is paying added scrutiny toward audit firms’ increasing use of network affiliates in their work and the potential for inconsistent quality that comes with such an approach.
More from Accounting & Auditing
-
PremiumU.K. financial regulator looks to streamline audit enforcement procedures
Auditors are supposed to keep businesses honest, but how much regulation is the optimum for the auditors – and how onerous and punitive should the enforcement regime be? A new consultation by the U.K. regulator, the Financial Reporting Council, opened on Oct. 1 and has put the vexed question of ...
-
ArticlePCAOB’s Christina Ho: How emerging technologies could improve audit quality
Emerging technologies, like artificial intelligence (AI) and advanced data analytics, can improve audit quality in significant ways. As the regulatory overseer of public-company audits, the Public Company Accounting Oversight Board (PCAOB) has a critical role to play by ensuring that its audit standards evolve as the audit profession evolves.
-
News BriefPCAOB chair Williams latest independent official pushed out by Trump
Continuing a Trump administration practice of firing independent regulators, the head of the Public Accounting Oversight Board has been sent packing.