On September 29, 2023, the SEC filed suit against international accounting firm Prager Metis CPAs, LLC and its California professional services firm, Prager Metis CPAs LLP. The SEC’s complaint alleges that, between December 2017 and October 2020, Prager Metis improperly included indemnification provisions in engagement letters for more than 200 audits, reviews, and exams. According to the complaint, once an auditor includes an indemnification provision in an engagement letter for an audit, review, or exam, the auditor ceases to be independent because those provisions “induce a departure from the standards of objectivity and impartiality which the concept of independence implies.”

The SEC’s complaint, filed in the U.S. District Court for the Southern District of Florida, charges Prager with violating the auditor independence provisions of the federal securities laws and aiding and abetting its clients’ violations of the federal securities laws. The complaint seeks a permanent injunction, disgorgement plus prejudgment interest, and a civil monetary penalty against Prager.

The SEC’s press release and a copy of the complaint are available here.