Hester Pierce, a commissioner at the U.S. Securities and Exchange Commission, emphasized that full transparency should not jeopardize sincere and well-intentioned efforts.
Hester Pierce, a commissioner at the U.S. Securities and Exchange Commission (SEC), expressed worries about the SEC’s recent warning to accounting firms regarding non-audit work for crypto companies.
In a tweet on July 28, Pierce disagreed with the SEC’s chief accountant, Paul Munter, who suggested an all-or-nothing approach for accounting firms dealing with crypto firms. Pierce believes that such an approach might discourage crypto companies from making sincere efforts to be transparent.
Crypto platforms & their accountants should be clear about what proof of reserves is and isn't & customers should understand the limitations, but why would we want to discourage good-faith efforts to provide more transparency? https://t.co/fsuxUGPrrb
— Hester Peirce (@HesterPeirce) July 27, 2023
Hester Pierce pointed out the importance of transparency in crypto firms and accountants verifying proof of reserves, but she questioned why accounting firms should be hesitant to provide assurance work to crypto companies.
In a tweet, Pierce asked, “Why would we want to discourage sincere efforts to provide more transparency?”
On the other hand, Paul Munter argued that partial engagements might lead crypto firms to selectively show only certain aspects of their business to accounting firms and present that information as a full audit to clients.
According to Paul Munter, he believes that work beyond the scope of a full audit might lack transparency for investors.
He mentioned that some crypto asset trading platforms and others in the crypto industry have advertised to investors that they retain third parties, including accounting firms, to review certain parts of their business, which they present as a kind of “audit.”
Munter stated that if an accounting firm discovers that a client is making deceptive statements about its non-audit work to the public, it should take a firm stance. This may involve making a “noisy withdrawal,” publicly disassociating itself from the client, or reporting the firm to the SEC.
In a tweet on July 29, Mike Shaub, an auditing and accounting ethics professor at Texas A&M University, responded to Munter’s statement, noting that auditors are bound by confidentiality rules, making it difficult for them to make public statements as Munter suggested.
The recent trend has been to take credit as being cutting edge (e.g., specializing in SPACs or crypto or whatever) to raise the profile, then to be low profile when things go south. That may have triggered SEC interest as well. If the auditor is silent in these cases, beware. 2/2
— Mike Shaub (@mikeshaub) July 28, 2023
Shaub also pointed out that certain accounting firms associate themselves with cryptocurrency expertise to enhance their reputation but tend to become unresponsive when issues or challenges arise.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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