The United States Securities and Exchange Commission (SEC) has issued a warning to accounting firms involved in auditing cryptocurrency companies to be cautious in how they market their reports.
The SEC’s principal advisor on accounting and auditing matters, Paul Munter, stated that some crypto companies have misrepresented their relationship with accounting firms as auditors, despite not meeting the standard definition of an audit.
The SEC is particularly concerned about crypto companies claiming that “proof of reserve” reports are equivalent to financial statement audits, which the Public Company Account Oversight Board (PCAOB) has deemed as limited in scope.
The SEC cautions investors to exercise extreme caution when relying on such reports to assess asset sufficiency.
Munter emphasizes that non-audit arrangements are not as rigorous or comprehensive as financial statement audits and may not provide reasonable assurance to investors.
The SEC expects accounting firms to take appropriate action if they observe crypto companies misleadingly referring to non-audit arrangements as financial audits.
