U.S. Sens. Elizabeth Warren (D-MA) and Ron Wyden (D-OR) are urging the Public Company Accounting Oversight Board (PCAOB) to take steps to stop what they call “sham audits” of crypto firms.
This latest request comes after the senators sent a letter to the PCAOB in January raising this very issue. PCAOB officials responded by confirming that it is aware of these sham audits. Still, the lawmakers said it has not done enough to address these risks following the recent bank failures, including Silvergate Bank, Silicon Valley Bank, and Signature Bank.
“Auditors’ sham reviews of crypto firms cast distrust and disrepute upon the entire auditing system: no credible auditor of public companies should be providing sham audits of crypto or other non-public firms. You have ample authority to establish standards for auditors that require any SEC-registered auditor to only conduct audits of crypto firms that comply with existing standards for audit quality,” the senators wrote to the PCAOB. “It is critical that PCAOB use its existing authority to ensure that sham crypto audits do not become an even bigger threat to investors, the public interest, and the integrity of the accounting system for SEC-registered issuers, brokers, and dealers.”
The senators expressed their disappointment that PCAOB has not used its existing authority to rein in abusive practices in crypto audits by PCAOB-registered auditors.
“A plain reading of the text of the Sarbanes-Oxley Act, which created the PCAOB and established its authority, clearly states that PCAOB has the authority to act on its broad responsibility to protect the integrity of the auditing system for SEC-registered brokers, dealers, and issuers. And given that the ongoing use of sham audits of crypto firms conducted by PCAOB-registered auditors mislead the public and threatens the integrity of that auditing system – and we now know, potentially the banking and financial systems – you have both the authority and responsibility to rein them in,” wrote the senators.
Warren and Wyden are calling on PCAOB to immediately use its authority to rein in sham audits of crypto firms. In addition, they are seeking answers to several questions about audits of crypto firms and proof-of-reserve reports by April 4.