Cybersecurity firm Darktrace has appointed EY to conduct an independent review of its key financial processes and controls after being accused by a short seller of manipulating its accounts.
The move is aimed at reassuring investors about the firm’s financial transparency. The review will be led by Paul Harrison, chair of Darktrace’s audit and risk committee, and the company has said that it is confident in the “robustness of Darktrace’s financial processes and controls”. However, it did not indicate when the findings would be released.
The announcement caused a 2% increase in Darktrace’s share price. Shares in the company have increased by 4% year-to-date, despite a sharp decline in January. Darktrace uses artificial intelligence tools to help companies tackle cyber threats.
The allegations against Darktrace were made by New York-based asset manager Quintessential Capital Management (QCM) last month.
QCM’s report accused the firm of “round-tripping” and “channel stuffing” practices that inflate revenue. QCM expressed skepticism about the validity of Darktrace’s financial statements and suggested that sales and growth rates had been overstated.
Darktrace CEO Poppy Gustafsson defended the firm against the claims, describing them as “unfounded inferences”. She added that Darktrace had “robust processes in our business” and that she stood by her team and the company.
Darktrace will publish its first-half earnings report on 8 March. It is not expected to be able to provide an update on the review at that time.
