Auditor of FTX USA Alongside Accounting Study for Collapsing Stock Market

  • Armanino, the auditor of the US branch of FTX, defended his accounting work for the stock market.
  • “We were never assigned to oversee internal controls,” the company’s director of operations told the FT.
  • Armanino has ceased its audit and proof-of-reserve efforts. FTX is facing a lawsuit from its customers.

Armanino, FTX’s US auditor, said in an interview with the company’s operations office, the Financial Times, that he stands by his accounting job for the cryptocurrency exchange.

“We are absolutely in favor of the FTX US study,” Armanino COO Chris Carlberg told the Financial Times on Friday. Armanino submitted a clean health report to the US branch of FTX after reviewing its financial situation in 2020 and 2021, and is known to be one of the top providers of proof-of-reservation reports for crypto firms, according to the FT.

“A few industry voices have said we should do a better job auditing internal controls, but we have never been tasked with auditing internal controls. This happens with public companies. For private company audits, it is not required by the standards,” Carlberg added.

This comes just a month after FTX exploded amid “significant” liquidity issues and declared bankruptcy, an event that spawned numerous accounting scandals on the crypto exchange and drew the attention of regulators and law enforcement. The exchange did not have its own accounting department, spent millions on vacation properties in the Bahamas, and merged client funds with Alameda Research, Sam Bankman-Fried’s crypto trading arm.

But, according to Carlberg, the firm’s auditors were not appointed to review internal controls at FTX, and auditing a company’s internal workings is not a requirement for private companies.

FTX’s new CEO, John Ray III, said that FTX “completely failed corporate controls and completely lacked such reliable financial information” – something critics said should have been a red flag for auditors. During a congressional hearing, Ray pointed out that the multi-billion dollar crypto exchange uses QuickBooks to manage its finances and approves invoices through Slack.

FTX International’s auditor Armanino and Prager Metis are being sued by FTX customers. Carlberg did not comment on the case, but noted that Armanino has withheld its audit and prudential proof services due to changing “market conditions.”

Commentators say the industry is experiencing a transparency issue and regulators need stricter policies to protect customers. Lawmakers criticized the Securities and Exchange Commission’s current approach to crypto regulation, saying it was too pristine.

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