FTX US's auditor stands by its accounting work for the collapsed crypto exchange, report says

• Armanino, the auditor for FTX's US branch, defended its accounting work for the exchange.
• "We were never engaged to audit internal controls," the company's chief operating officer told the FT.

FTX's US auditor, Armanino, is standing by its accounting work for the crypto exchange, the firm's chief operating office told the Financial Times in an interview.

"We definitely stand by the FTX US work," Armanino chief operating officer Chris Carlberg told the Financial Times on Friday. Armanino gave FTX's US branch a clean bill of health after reviewing its finances in 2020 and 2021, and it's known to be one of the top providers of proof of reserve reports for crypto firms, according to the FT.

"A few industry voices have said we should have done a better job auditing internal controls, but we were never engaged to audit internal controls. That happens with public companies. It's not required by the standards for private company audits," Carlberg added.

That comes just a month after FTX imploded amid "significant" liquidity problems and declared bankruptcy, an event that unearthed numerous accounting scandals within the crypto exchange and drew the attention of regulators and law enforcement. The exchange had no in-housing accounting department, shelled out millions on Bahamian vacation properties, and commingled customer funds with Sam Bankman-Fried's crypto trading arm, Alameda Research.

But according to Carlberg, the firm's auditors weren't tapped to look into internal controls at FTX, and that auditing the internal workings of a company isn't a requisite for private corporations.

John Ray III, FTX's new CEO, has said that FTX had a "complete failure of corporate controls and such a complete absence of trustworthy financial information" – something critics say should have been a red flag to auditors. During a congressional hearing, Ray pointed to the fact that the multibillion-dollar crypto exchange used QuickBooks to manage its finances, and approved invoices via Slack.

Armanino and Prager Metis, the auditor of FTX International, are being sued by FTX customers. Carlberg did not comment on the lawsuit, but mentioned that Armanino has stopped its auditing and issuing proof of reserve services due to changing "market conditions."

Commentators say the industry is suffering from a transparency problem, and needs stricter policies from regulators to protect customers. Lawmakers have been critical of the Securities and Exchange Commission's current approach to crypto regulation, which they say has been too hands-off.