Sens. Warren, Wyden question quality of auditors’ oversight in light of FTX debacle

Two United States senators person taken their questions astir the show of the accounting firms progressive successful the crypto abstraction to a higher powerfulness – the Public Company Accounting Oversight Board (PCAOB). Failure to uncover alleged criminality and mediocre recordkeeping astatine FTX has sullied the representation of the PCAOB and the accounting profession, the senators said.

In a missive addressed to PCAOB seat Erica Williams and dated Jan. 25, Democratic Sens. Elizabeth Warren and Ron Wyden pointed retired claims erstwhile FTX CEO Sam Bankman-Fried made astir passing audits by ample accounting firms Armanino and Prager Metis. Current FTX CEO John Ray told a bankruptcy tribunal that helium had “substantial concerns arsenic to the accusation presented successful these audited fiscal statements.”

In addition, the senators questioned the firms’ impartiality, saying they acted arsenic “crypto manufacture cheerleaders.”

Just sent from @SenWarren to @PCAOB_News: "We constitute regarding caller turmoil successful the cryptocurrency manufacture pursuing the illness of
crypto level FTX successful Nov 2022 and the relation that auditors whitethorn person played successful misleading the public..." https://t.co/erbblBns9K pic.twitter.com/nDjenQ9awW

— blockchain tipsheet (@blockchaintpsht) January 26, 2023

Warren and Wyden mentioned Williams’ connection that PCAOB registered firms are lone required to conscionable the board’s standards “when they’re auditing a nationalist issuer oregon broker trader nether our jurisdiction, not for immoderate different clients” and pointed retired PCAOB rules that look to contradict Williams’ statement.

The senators besides knock impervious of reserve reports. They wrote:

“In reality, proof-of-reserves examinations autumn importantly abbreviated of existent audits, arsenic proof-of- reserves reports bash not travel established standards, are not overseen by the PCAOB, and bash not beryllium that listed assets really beryllium to customers.”

The crushed for their treatment of a process that is explicitly not taxable to PCAOB oversight became wide successful the 12 questions posed by the letter. They asked successful their archetypal question:

“What risks bash investors look erstwhile crypto firms – whether publically traded oregon backstage – effort to walk disconnected proof-of-reserve examinations arsenic ‘audits’ and what is the PCAOB doing to mitigate these risks?”

Warren and Wyden went connected to question confirmation that the PCAOB had taken each due actions successful narration to crypto manufacture auditors. They besides inquire if Williams volition “commit to utilizing your inspection authorization to measure and publically study connected auditors that provided services for immoderate crypto institution acting arsenic a broker dealer, adjacent if the steadfast was not registered arsenic specified with the SEC.”

Finally, the senators asked astir the standards auditors are held to erstwhile they audit organizations with crypto plus holdings oregon shares successful crypto companies. They said that they anticipation to person an reply by Feb. 8.

Related: Senate Finance Committee Chair probes 'lack of safeguards' successful crypto taxation incentives

Warren is 1 of the crypto industry’s astir vocal critics. Wyden, the erstwhile Senate Finance Committee chair, has a much nuanced grounds connected crypto. He partnered with “crypto senator” Cynthia Lummis successful 2021 to suggest a “fix” to the crypto reporting requirements successful the Bipartisan Infrastructure Law. He also wrote letters to Binance, Coinbase, Bitfinex, Gemini, Kraken and KuCoin successful November to inquire astir their user protections.

The PCAOB is simply a nonprofit corp acceptable up by the U.S. national authorities nether the 2002 Sarbanes–Oxley Act. The SEC indicated successful December that it excessively volition beryllium keeping a person oculus connected auditors.