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Hester Pierce strikes back against SEC crypto warning to accounting firms

Crypto Firms and Accounting Firms: Transparency Matters

Commissioner Hester Pierce of the United States Securities and Exchange Commission (SEC) has expressed her worries about the agency’s recent statement that suggested accounting firms should not take on non-audit work for crypto firms.

On July 28, Pierce questioned the statement made by SEC’s chief accountant Paul Munter, who proposed that accounting firms should adopt an all-or-nothing approach when working with crypto firms. Pierce believes this could lead crypto firms to be less transparent.

Pierce noted that crypto firms and accountants should work together to ensure transparency regarding proof of reserves. She asked, “Why would we want to discourage good-faith efforts to provide more transparency?”

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Partial Engagements and Crypto Firms

Munter argued that partial engagements could lead to crypto companies cherry-picking certain aspects of their business to present to accounting firms as a full audit, and that this lack of transparency would be detrimental to investors.

He proposed that if an accounting firm discovers a crypto firm is making false statements about its non-audit work, they should consider making a “noisy withdrawal” from the client, such as making a public statement or reporting them to the SEC.

Mike Shaub, an auditing and accounting ethics professor at Texas A&M University, responded to Munter’s comments in a July 29 tweet, noting that auditors are bound by confidentiality, making it difficult to make public statements as Munter suggested.

Shaub also brought up the problem of some accounting firms that try to leverage their reputation by associating themselves with cryptocurrency expertise but when issues arise, they become unresponsive.

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