Businessman accountant using calculator for calculating crypto currency report on desk office

SEC warns audit firms over incomplete and misleading crypto audits

Accounting firms working with digital asset firms must be cautious with how their reports are used and represented by their clients, the top accounting tsar at the U.S. Securities and Exchange Commission (SEC) has warned.

The securities regulator will censure or suspend accounting firms whose audit reports are used to violate the antifraud provisions of the federal securities laws, warned Paul Munter, the SEC’s chief accountant.

Munter noted that crypto firms risk suggesting that the non-audit arrangements with their auditors are as precise as financial statement audits.

“Non-audit arrangements are neither as rigorous nor as comprehensive as a financial statement audit and may not provide any reasonable assurance to investors,” Munter noted.

An audit firm that becomes aware of its clients misrepresenting its reports should consider “making a noisy withdrawal, disassociating itself from the client, including by way of its own public statements, or, if that is not sufficient, informing the Commission.”

In the future, audit firms should include prohibitions on how the client can use its non-audit arrangements as part of the contract, Munter added.

The warning comes at a time when several audit firms have reconsidered their association with digital asset firms. In December, Paris-based audit giant Mazars cut off its relationship with all digital asset clients—its list of clients included Binance,, and KuCoin.

Mazars also pulled down the proof of reserves reports published for the three exchanges. However, the three had already publicly used these reports to reassure investors and regulators about their financial health. Binance founder Changpeng Zhao had, on several occasions, cited the Mazars report as an “audited proof of reserves.”

California-based accounting firm Armanino also cut off digital asset clients in December. The company has been auditing digital asset firms since 2014, offering services such as proof of reserve audits and stablecoin attestations.

Armanino’s biggest client in the sector was FTX.US, the American subsidiary of the collapsed exchange. The auditor gave the exchange a clean bill of health in 2020 and 2021, only for FTX.US to collapse the next year. An FTX.US investor who lost his money when the exchange went belly-up sued the auditor last December.

‘Crypto Mom’ Hester Peirce has opposed the latest directive, claiming it will “discourage good-faith efforts to provide more transparency.”

Watch: Regulatory compliance for blockchain & digital assets

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