Elizabeth Warren Takes Aim at ‘Shady’ Crypto Audits in Letter to Auditor General
US Senators Elizabeth Warren and Ron Wyden said they are “disappointed” that the Public Company Accounting Oversight Board (PCAOB) is not holding auditors accountable for “sham” crypto audits.
In the latest letter to PCAOB Chair Erica Williams yesterday, Warren and Wyden specifically wrote about their concerns about the role “shady audits play in giving crypto firms a veneer of safety and financial stability.”
The two Democratic senators first contacted the PCAOB, a nonprofit organization that oversees audits of public companies and SEC-registered broker-dealers, in January of this year, pointing to limited audits conducted by PCAOB-registered firms Prager Metis and Armanino for the bankrupt crypto. replace FTX before it collapses.
Given that the ongoing use of bogus audits of crypto firms by PCAOB-registered auditors misleads the public and threatens the integrity of that auditing system – and we now know, potentially the banking and financial systems – you have both the authority and the responsibility to rein them in,” it said in yesterday’s letter.
Other auditing firms called out by Warren and Wyden in their January letter included Mazars Group and Marcum, which validated so-called “proof-of-reserves” reports for several crypto exchanges.
Prager Metis, Armanino and Marcum did not immediately respond Decrypt their request for comment.
Mazars, which withdrew from working with crypto companies in December, said Decrypt it had “no comment to share.”
Crypto audits and “proof of reserves”
Warren and Wyden also argued that proof-of-reserves (PoR) reports — an auditing practice for crypto firms that provide a report of the assets in reserve — “do not follow established standards, are not overseen by the PCAOB, and do not prove that listed assets actually belong to clients .”
In response to lawmakers’ concerns, PCAOB Chair Erica Williams said in a February letter that “unfortunately, the PCAOB faces statutory limitations in overseeing audits of specific cryptocurrency companies.”
Acknowledging the risks associated with audits of crypto companies, Williams also argued at the time that “legislative changes would be necessary for the PCAOB’s standard-setting, inspections, and enforcement programs to apply to audits and auditor conduct regarding entities that are not SEC-registered issuers, brokers, or dealers.”
However, Warren and Wyden are clearly unhappy with these answers.
Citing the Sarbanes-Oxley Act, a federal law that mandates certain financial recordkeeping and reporting practices for corporations and “created the PCAOB,” the lawmakers insist that its plain reading says the opposite, giving the PCAOB “authority to act on its broad responsibility for protecting the integrity of the audit system for SEC-registered broker-dealers and issuers.”
“While these standards must relate to audit reports of SEC-registered issuers, brokers and dealers, they are not required to be exclusive to them,” the letter said.
According to Warren and Wyden, “if PCAOB-registered firms can deceive investors by issuing bogus audits, then investors have no way of knowing when those auditors’ work is worthy of their trust.”
Earlier this month, the PCAOB urged investors to exercise caution with PoR reports, which it called “inherently limited” and “not performed in accordance with PCAOB auditing standards.”
Crypto audits became central after the FTX implosion last November. Exchanges, including Crypto.com, Binance and OKCoin, have, in response, been quick to issue asset insurance policies to unnerve investors.
However, these reports have not yet been performed by any of the Big Four accounting firms.
“While the big four accounting firms have been conservative and have not yet agreed to audit any privately held crypto exchanges, there are other world-class firms that we are in discussions with to support our transparency,” a Binance spokesperson said. Decrypt. “If one of the big four changes their mind, the door is wide open and they already know how to reach us.”
