• The U.S. Securities and Exchange Commission (SEC) issued a warning to accounting firms that may be held accountable for any client’s misleading statements regarding audits and transparency in the crypto industry.
• Paul Munter, Chief Accountant to the SEC, cautioned against non-audit work being wrongly equated with an audit.
• He also noted that there are numerous risks associated with working with clients in the rapidly evolving cryptocurrency sector.
SEC Cautions Accounting Firms Against Accommodating Non-Compliant Crypto Clients
The U.S. Securities and Exchange Commission (SEC) has warned accounting firms about the potential risks of serving clients in the rapidly evolving crypto industry, cautioning them against accommodating non-compliant crypto clients.
Paul Munter, Chief Accountant to the SEC, said that many crypto companies have wrongly stated that certain non-audit work is equivalent to an audit, thus posing a risk of liability for accounting firms should they make such incorrect statements or allow their clients to do so.
Risks Of Misleading Statements And Transparency
Munter warned that accounting firms could be held responsible for their own statements and any incorrect statements made by their clients. He explained that there are a “variety of facts and circumstances” under which auditors might be found responsible for compliance failures of their clients, particularly when they have knowledge or involvement in such activities prior to taking on a client engagement or during the course of performing audit engagements for those customers.
Audits Vs Non-Audit Work
Munter highlighted that audits provide assurance regarding financial statement reliability while non-audit services may not lead to such assurance as they often lack sufficient scope or level of testing necessary to achieve this purpose. He clarified: “Non-audit services do not provide similar assurances; rather they address discrete matters such as design effectiveness evaluations or limited procedures performed over certain assertions made by management.“
Evolution Of Cryptocurrency Sector
Munter further emphasized that due to rapid changes in technology and market structure within the cryptocurrency sector, accounting firms must remain diligent regarding trends within the industry so as not to expose themselves or their clients to regulatory enforcement action from authorities including but not limited to SEC staff examinations or investigations into potential violations of securities laws or regulations through customer activities related thereto.
In conclusion, Munter urged accounting firms who undertake crypto engagements not only verify whether all representations made by customers are accurate but also ensure they have taken appropriate steps – including obtaining sufficient appropriate evidence – in order for them meet professional standards required by law when undertaking such engagements so as not incur any liability from regulators or other bodies related thereto.