Commissioner Hester Pierce’s Concerns
Commissioner Hester Pierce of the United States Securities and Exchange Commission (SEC) has expressed her worries regarding the agency’s recent statement advising accounting firms against providing non-audit services to crypto firms.
Pierce’s Tweet on July 28
In a tweet on July 28, Pierce challenged the statement made by the SEC’s chief accountant, Paul Munter. She proposed that accounting firms should not adopt an all-or-nothing approach in their dealings with crypto firms, arguing that this might discourage crypto firms from being transparent in their efforts.
The Importance of Transparency
While Pierce acknowledged the need for crypto firms and accountants to be transparent about proof of reserves and clearly define acceptable practices, she questioned the rationale behind cautioning accounting firms against providing assurance work to crypto companies.
Pierce stated in her tweet, “Why would we want to discourage good-faith efforts to provide more transparency?”
Munter’s Perspective
On the other hand, Munter argued that partial engagements with crypto firms could lead to selective disclosure of certain aspects of their business to accounting firms. Subsequently, these aspects might be presented as a full audit to clients, lacking transparency for investors.
Munter noted, “Certain crypto asset trading platforms, with others in the crypto industry, have marketed to investors their retention of third parties, sometimes accounting firms, to perform some sort of review of certain parts of their business, often presented as a purported ‘audit.'”
Accounting Firms’ Responsibility
According to Munter, if an accounting firm discovers that a client is making misleading statements about its non-audit work to the public, it should consider making a “noisy withdrawal” by disassociating itself from the client. This can be done through a public statement or reporting the crypto firm to the SEC.
Response from Mike Shaub
Mike Shaub, an auditing and accounting ethics professor at Texas A&M University, responded to Munter’s statement in a tweet on July 29. He pointed out that auditors are bound by confidentiality obligations, making it challenging for them to make public statements as suggested by Munter.
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