Hester Pierce, a United States Securities and Exchange Commission commissioner, argued that full transparency should not come at the cost of compromising good-faith efforts.
News
Commissioner Hester Pierce of the United States Securities and Exchange Commission (SEC) has raised concerns about the agency’s recent statement advising accounting firms against taking on non-audit work for crypto firms.
In a July 28 tweet, Pierce challenged the recent statement by the SEC’s chief accountant Paul Munter, proposing that accounting firms adopt an all-or-nothing approach in their dealings with crypto firms. Pierce believes this might cause crypto firms to shy away from making good-faith 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
While Pierce noted that crypto firms and accountants should ensure transparency regarding proof of reserves, specifying what is and isn’t acceptable, she questioned why accounting firms should be cautious of providing assurance work to crypto firms.
“Why would we want to discourage good-faith efforts to provide more transparency?” Pierce asked in a tweet.
Munter argued that partial engagements might result in crypto firms selectively choosing only certain aspects of the business to show accounting firms and then presenting that information as a full audit to clients.
He believes that work beyond a full audit’s scope will lack transparency for investors, stating:
According to Munter, if an accounting firm discovers that a client is making misleading statements about its non-audit work to the public, it should consider making a “noisy withdrawal, disassociating itself from the client” by making a public statement or reporting the crypto firm to the SEC.
Related: SEC appeal could amplify Ripple win, says Ripple Labs legal chief
Mike Shaub, an auditing and accounting ethics professor at Texas A&M University, responded to the statement in a July 29 tweet, mentioning that auditors are obligated by confidentiality, making it challenging to make public statements like 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
Shaub also highlighted the issue of some accounting firms aligning themselves with cryptocurrency expertise to boost their reputation but becoming unresponsive when problems arise.
Magazine: SEC reviews Ripple ruling, US bill seeks control over DeFi, and more: Hodler’s Digest, July 16-22
