Darktrace, one of the UK’s largest cyber security companies, was founded in 2013 by a group of former intelligence experts and mathematicians.
Omar Marquez | Images of SOPA | LightRocket via Getty Images
LONDON — A cyber security firm A dark trail on Monday said it had appointed auditing firm EY to review its “key financial processes and controls” in a bid to calm investor fears after a short seller accused the company of manipulating its accounts.
“The board has full confidence in the reliability of Darktrace’s financial processes and controls. As a sign of this confidence, we have commissioned an independent third-party review of E&Y,” Jeffrey 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 able to update the markets before its first-half earnings report on March 8, and did not specify a timetable or time for when it would release the results.
Darktrace shares rose more than 2% on Monday after the announcement. The stock is up 4% year-to-date, despite a sharp drop in late January.
Darktrace, whose tools enable companies to fight cyber threats using artificial intelligence, was targeted last month in a report by New York-based asset manager Quintessential Capital Management that investigated Darktrace’s business model and sales practices.
QCM said it had uncovered alleged accounting flaws at Darktrace, including “one-off switching” and “channel stuffing” practices aimed at boosting revenue. The firm said it was “deeply skeptical of the validity of Darktrace’s financial statements” and believed sales and growth rates may have been overstated.
Darktrace has denied the claims, while its CEO Poppy Gustafsson defended the company against what she called “unfounded conclusions” made by QCM and said it had “robust processes in our business”. She added: “I support my team and the business I represent.”
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