Darktrace, one of the UK’s largest cybersecurity companies, was founded in 2013 by a group of former intelligence experts and mathematicians.
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LONDON – A cyber security company Darktrace there said it has appointed the audit firm EY to review “key financial processes and controls,” in a bid to soothe investors’ fears after a short seller accused the company of manipulating its accounts.
“The board believes in the robustness of Darktrace’s processes and financial controls. As a sign of that confidence, we have commissioned an independent third-party review by E&Y,” Geoffrey Hurst, chairman of the board, said in a statement. “We look forward to the results of this review.”
EY will report to Darktrace’s audit and risk committee chair, Paul Harrison, Darktrace said. Darktrace said it does not expect to be in a position to update the market in the review at the time of the first half earnings report on March 8 and did not provide a timeline or when it will publish the findings.
Darktrace shares rose more than 2% on the heels of the announcement. Shares are up 4% year-to-date despite a sharp plunge in late January.
Darktrace, a tool that allows companies to fight cyberthreats with artificial intelligence, was targeted last month in a report by New York-based asset manager Quintessential Capital Management, which investigated Darktrace’s business model and sales practices.
QCM said it found alleged flaws in Darktrace’s accounting, including “round-tripping” and “channel stuffing” practices that seek to inflate revenue. The company said it was “highly skeptical of the validity of Darktrace’s financial statements” and believed sales and growth rates may be overstated.
Darktrace denied the claims, with CEO Poppy Gustafsson defending the company against what it called “baseless inferences” made by QCM and saying there were “robust processes in our business.” He added: “I stand by the team and the business they represent.”
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