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- 1 SEC chief accountant raised concerns about the participation of accounting firms and their responsibilities aligned with crypto companies’ auditing.
- 2 “Accounting firms should consider such risks and responsibilities during its client acceptance procedures,” he stated.
The flow of money or finance or capital raises concerns and attracts inspection. In layman’s terms, the process is called audits in the financial sector. The burgeoning financial assets class of cryptocurrencies and the companies dealing with them become liable for scrutiny. US financial regulator SEC accountant, however, was seen to raise questions on auditing firms working for crypto trading companies.
SEC Shifts Focus on Crypto Auditors
Paul Munter, Chief Accountant at the Securities and Exchange Commission (SEC), talked about accounting firms with crypto companies in their clientele in the statements released on July 27, 2023. He raised concerns about the increased “scandal and insolvency” in the crypto industry and the review process of accounting firms.
Munter stated, “Certain crypto asset trading platforms, with others in the crypto industry, have marketed to investors their retention of third parties, sometimes accounting firms, to perform some sort of review of certain parts of their business, often presented as a purported “audit.”
The SEC chief accountant finds the review in the name of the so-called audit as a mere “non-audit work.” He claims that it’s “neither as rigorous nor as comprehensive as a financial statement audit.” These processes fail to provide assurance to investors who align their interests with such companies.
The broader cryptocurrency industry had seen a fall in companies that were prominent once. The reason behind the same was the financial mismanagement and improper check on the activities. Such companies claimed to have timely auditing but their failure in the contingency raises questions about the methods of the third-party auditors.
Quick Tide of Auditing Comes and Goes
In the wake of last year’s FTX implosion, one of the biggest mishaps in the crypto industry, other prominent companies came under skepticism. Many of these companies then turned to their audits and started employing third-party firms.
Cryptocurrency exchanges including KuCoin, Crypto.com, and other leading firms partnered with the auditing firm, Mazars. The crypto companies sought the auditing firm to publicize the proof of reserves report to showcase their confidence in their operations and finances.
However, Mazars soon reportedly stopped its auditing for the crypto clients. Around the same time, Armanino, the accounting firm working with the United States Subsidiary of FTX, FTX.US, reported putting an end to crypto auditing practice.
Warnings to Auditing Firms from SEC
To ensure that auditing firms are being held responsible for their work, the SEC introduced legal actions as consequences for failure to do so.
Munter asserts in the statement that the accounting firm would be legally held responsible if the clients try to mislead, citing the financial review. If such a thing comes up, the auditing firm could be liable under the anti-fraud laws for its clients’ statements.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
