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Paul Munter – the principal advisor to the Securities and Exchange Commission (SEC) regarding accounting and auditing issues – issued a caution on Thursday to cryptocurrency accounting firms whose services are improperly advertised as a replacement for “audits.”
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- The announcement, titled “The Potential Pitfalls of Purported Crypto ‘Assurance’ Work,” indicated that clients of these firms frequently present their services as being equivalent to a financial statement audit.
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“Such claims are inaccurate,” he stated. “Non-audit arrangements lack the rigor and comprehensiveness of a financial statement audit and may not offer any reasonable assurance to investors.”
- The advisor referred to a March report from the Public Company Accounting Oversight Board (PCAOB), which cautioned investors about accounting firms issuing Proof of Reserves (PoR) reports for cryptocurrency exchanges.
- PoR is a blockchain-based accounting approach that certain exchanges have utilized to confirm the quantity of crypto assets they possess. The PCAOB warned that these reports “are not audits,” as they do not consider a crypto firm’s liabilities, among other aspects.
- Munter’s statement emphasized that accountants serving crypto firms that mislead investors regarding the nature of their work could face liability under securities regulations.
- If accounting firms discover that their clients are making misleading claims, the Office of the Chief Accountant (OCA) advised a “noisy withdrawal,” disassociating itself from the client, including through its own public statements.
- A comparable withdrawal took place with Mazars Group in December 2022, when the firm distanced itself from all cryptocurrency firms shortly after publishing a PoR report on Binance.
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