Crypto-hating Senator Elizabeth Warren sent a letter to the Public Company Accounting Oversight Board (PCAOB) yesterday, expressing her disappointment with the agency for failing to hold auditors responsible for what she termed “Sham” crypto audits.
The senator had previously reached out to PCAOB in January, questioning the limited audits carried out by PCAOB-registered companies Armanino and Prager Metis for the now-bankrupt crypto exchange FTX before its downfall. She said such audits mislead the public and pose a huge risk to the integrity of the auditing system.
At the time, several auditing companies, including Marcum and Mazars Group, which had validated proof-of-reserves (PoR) reports for various exchanges, called out Warren for the claims she made in her January letter to PCAOB.
Warren Vs. PCAOB
Warren argued that PoR reports (auditing practices that give insights into a crypto firm’s assets in reserve) do not adhere to the stipulated standards and don’t prove that the listed assets truly belong to crypto companies’ customers. The senator also stated that PCAOB does not oversee those audits.
In response to Warren, PCAOB chairman Erica Williams argued that the agency faces several statutory limitations in regard to supervising the audits of crypto companies. Williams suggested that legislative adjustments would be required to give the agency more control over auditing firms.
But Warren’s latest letter to PCAOB clearly shows she is unsatisfied with the agency’s answer. The letter argues that if PCAOB-registered companies are allowed to issue sham audits to investors, then these investors lack a way of determining when the auditing companies’ work is to be trusted.
PCAOB Chairman Warns of Proof-of-Reserves Reports
Earlier this month, Williams released a statement urging investors to be cautious with PoR reports, revealing that they’re not carried out in accordance with the auditing standards set by PCAOB.
Crypto audits made headlines in the wake of FTX’s collapse in November 2022. Since then, several crypto exchanges, including Binance, OkCoin, and Crypto.com, have been quick to offer investors asset assurances to settle their nerves.
However, the three exchanges have yet to conduct an external audit.