US accounting watchdog warns investors about proof-of-reserve reports

The Public Company Accounting Oversight Board (PCAOB), a watchdog that oversees audits of nationalist companies successful the United States, precocious issued an advisory that warned investors astir proof-of-reserves (PoR) reports issued by auditing firms.

Crypto entities whitethorn prosecute a work supplier to contented “proof of reserve” reports. A caller Investor Advisory from the PCAOB’s Office of the Investor Advocate urges investors to workout caution with these reports. https://t.co/aAykzlc7k1 #PCAOBresources pic.twitter.com/7S6jLCC2np

— PCAOB_News (@PCAOB_News) March 8, 2023

The PCAOB, which is backed by the U.S. Securities and Exchange Commission (SEC), pointed retired that investors should not "place undue reliance" connected PoR reports which are not wrong the board's oversight authority. The advisory wrote: 

“Importantly, investors should enactment that PoR engagements are not audits and, consequently, the related reports bash not supply immoderate meaningful assurance to investors oregon the public.”

In addition, the committee besides argued that PoR reports don’t supply assurances connected the authorities of the assets aft issuing the report. According to the PCAOB, PoRs don’t bespeak if the assets were used, lent, oregon became unavailable to customers aft the report’s publication. Apart from this, the committee besides said that PoR reports bash not supply assurance successful presumption of the effectiveness of interior controls oregon governance of the crypto entity.

The committee besides noted that PoR reports are not conducted successful accordance with the PCAOB auditing standards. Furthermore, the committee highlighted that there’s a deficiency of uniformity with work providers that marque PoR.

“Proof of reserve reports are inherently limited, and customers should workout utmost caution erstwhile relying connected them to reason that determination are capable assets to conscionable lawsuit liabilities,” the advisory added.

Related: Nic Carter dives into proof-of-reserves, ranks speech attestations

The informing came aft galore crypto exchanges jumped into the inclination of providing PoR reports successful an effort to guarantee investors of their fiscal presumption aft the FTX debacle. On Jan. 19, crypto speech OKX declared $7.5 cardinal successful liquid assets wrong its PoR report. On Feb. 23, speech MEXC Global besides released its PoR aft 45 days of testing.

More recently, crypto speech Binance besides added 11 tokens to its PoR report, claiming a full of $63 cardinal successful its reserves connected March 7.