U.S. Senators Elizabeth Warren and Ron Wyden said they are “disappointed” with the Public Company Accounting Oversight Board’s (PCAOB) failure to hold auditors accountable for “sham” crypto audits.

In the newest letter to PCAOB chair Erica Williams yesterday, Warren and Wyden wrote specifically of their concerns about the role "shady audits play in giving crypto firms a veneer of safety and financial stability."

The two Democratic senators first contacted PCAOB, a non-profit organization overseeing the audits of public companies and SEC-registered brokers and dealers, in January this year, pointing to limited audits conducted by PCAOB-registered firms Prager Metis and Armanino for the bankrupt crypto exchange FTX prior to its collapse.

“Given that the ongoing use of sham audits of crypto firms conducted by PCAOB-registered auditors mislead the public and threatens the integrity of that auditing system—and we now know, potentially the banking and financial systems—you have both the authority and responsibility to rein them in," yesterday's letter read.


Other auditing firms, called out by Warren and Wyden in their January letter, included Mazars Group and Marcum, which validated so-called “proof-of-reserves” reports for several crypto exchanges.

Prager Metis, Armanino, and Marcum didn’t immediately respond to Decrypt’s request for comment.

Mazars, which withdrew from working with crypto companies in December, told Decrypt it had "no comment to share."

Crypto audits and 'proof of reserves'

Warren and Wyden also argued that proof-of-reserves (PoR) reports—an auditing practice for crypto firms that provides a report of the assets in reserve—"do not follow established standards, are not overseen by the PCAOB, and do not prove that listed assets actually belong to customers."


Responding to the lawmakers’ concerns, PCAOB chair Erica Williams said in a February letter that “unfortunately, the PCAOB confronts statutory limitations when it comes to controlling the audits of specific cryptocurrency companies.”

Williams, who acknowledged the risks related to audits of crypto companies, also argued at the time that “legislative changes would be needed for the PCAOB’s standard-setting, inspections, and enforcement programs to apply to audits and auditor behavior concerning entities that are not SEC-registered issuers, brokers or dealers.”

Warren and Wyden, however, are clearly unhappy with those answers.

Citing the Sarbanes-Oxley Act, a federal law that mandates certain practices in financial record keeping and reporting for corporations and “created the PCAOB,” the lawmakers insist that its plain reading states the opposite, giving PCAOB ”the authority to act on its broad responsibility to protect the integrity of the auditing system for SEC-registered brokers, dealers, and issuers.”

“Although these standards must be related to audit reports of SEC-registered issuers, brokers, and dealers, they are not required to be exclusive to them,” reads the letter.

According to Warren and Wyden, “if PCAOB-registered firms can fool investors by issuing sham audits, then investors have no way of knowing when these auditors’ work is worthy of their trust.”

Earlier this month, PCAOB urged investors to exercise caution with PoR reports, which it called “inherently limited” and “are not conducted in accordance with PCAOB auditing standards.”

Crypto audits took center stage after the FTX implosion last November. Exchanges, including Crypto.com, Binance, and OKCoin, have, in response, been quick to issue asset assurances to settle investors' nerves.


Still, these reports have yet to be conducted by any of the Big Four accounting firms.

"While the Big Four accounting firms have remained conservative and have yet to agree to audit any privately held crypto exchange, there are other world-class firms that we are in discussions with to support our transparency efforts," a Binance spokesperson told Decrypt. "If one of the Big Four changes their mind, our door is wide open and they already know how to reach us."

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