The U.S. Securities and Exchange Commission (SEC) issued a warning to accountants this week, cautioning them to avoid partaking in misrepresented “audits” for crypto firms.
Paul Munter, the chief accountant at the SEC, says in a new statement that crypto exchanges and other digital asset companies have been tapping accounting firms to review parts of their businesses and then passing those partial reviews off as “audits.”
“As accounting firms increasingly engage in this sort of non-audit work, their clients’ marketing and terminology risks misleadingly suggesting that these alternative, non-audit arrangements are at parity with, or even more ‘precise’ than, a financial statement audit. Such suggestions are false. 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 says accountants need to monitor the statements their crypto clients make about their work. The SEC official suggests accounting firms implement contractual obligations that limit what a client can say about non-auditing work.
Warns Munter,
“Because of the importance of an accountant’s independence to the integrity of the financial reporting system, the Commission has concluded that circumstances that raise questions about an accountant’s independence always merit heightened scrutiny, and so a single instance may merit sanctions under the rule. And improper professional conduct by an accountant may create liability for the entire audit firm, which serves a critical gatekeeper function with respect to investor protection in the public interest. No audit firm is too small, or too big, to be suspended from appearing or practicing before the Commission.”
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