Senators Call for PCAOB to Tighten Regulation on Crypto Audits  

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Earlier this year, Sen. Elizabeth Warren, D-Massachusetts, and Senate Finance Committee Chairman Ron Wyden, D-Oregon, asked the Public Company Accounting Oversight Board (PCAOB) to ramp up regulations on the audits of cryptocurrency companies after high-profile companies like FTX recently went bankrupt.  

In a letter to PCAOB Chair Erica Williams, they highlighted the insufficient ‘proof of reserve’ examinations and limited audits provided by firms like Prager Metis and Armanino for FTX before its collapse, as well as the ‘sham audits’ boasted by crypto companies.  

Warren and Wyden argued that these reports of ‘scandalous accounting practices’ happening in the crypto industry not only raise the question of crypto accounting firms’ integrity but ‘tarnish[es] the credibility of the PCAOB,’ as well as damages the confidence investors and the public have in the PCAOB-registered auditors. They are asking the PCAOB to toughen their regulations to protect investors and the public from making misinformed investment decisions.  

When Mazars published Binance’s proof-of-reserves report, it announced that it would suspend its work with Binance and other crypto firms. They stated that there were ‘concerns regarding the way these reports are understood by the public.’ Armanino also made a similar statement when announcing that they would no longer work with the crypto industry, citing ‘a pretty big gap in understanding between what an audit or proof of reserve offering provide to the recipients of those reports.’  

The argument stands that the PCAOB has a responsibility to regulate cryptocurrency firms to protect investors and the public from making ill-informed investments. Although these firms are private, PCAOB Rule 3100 states that ‘a registered public accounting firm and its associated persons shall comply with all applicable auditing and related professional practice standards,’ and Rule 3200 states “in connection with the preparation or issuance of any audit report, a registered public accounting firm and its associated persons shall comply with all applicable auditing standards adopted by the Board.” Warren and Wyden say these rules are ‘clearly not restricted solely to public companies.’  

To read the full letter, click here.