The SEC warned accounting firms working as crypto “auditors” could be censured or suspended if they’re linked to misleading marketing.
The Securities and Exchange Commission (SEC) has issued a warning regarding a concerning development where accounting firms are partnering with cryptocurrency trading platforms that have a history of scandals and financial catastrophes inside the cryptocurrency industry.
Notably, the commission observes that specific participants in the blockchain sector endorse phony “audits” to draw in investors. The SEC discouraged Such non-audit agreements because they do not offer investors the same level of assurance as a thorough audit of the financial statements.
The report emphasizes the hazards connected with these falsely portrayed “assurance” services, which have already been identified by the commission’s staff, PCAOB, and other industry experts. The study focuses on accountants considering providing non-audit services to customers who deal with digital currency.
Message from SEC to accounting firmsAccording to the SEC, there may be legal repercussions if the services of an accounting company are misrepresented.
Federal securities laws’ antifraud provisions would be broken if a client made false statements concerning a firm’s non-audit operations. A “noisy withdrawal,” in which the accounting firm publicly ends its relationship with the client and notifies the SEC, may be a remedy.
Accounting firms may give limited non-audit advising services to prospective cryptocurrency market players who intend to pursue a registered public offering before accepting an audit contract.
Before accepting an auditing assignment, accounting firms must examine if their earlier non-audit actions violate the independence standards. When conducting audits subject to the commission’s independence standards, auditors must exhibit both actual and apparent independence.
If an audit company advocates for or engages in lobbying on behalf of a client during the audit engagement, the image of independence may be compromised.
If an accounting company or its accountants violate federal securities laws or independence requirements, they risk being censured or barred from working for the SEC.
Punishment may also result from professional misbehavior, such as willful or wanton disregard for standards of behavior. The SEC highlights the critical role of audit firms in safeguarding investors and points out that unethical professional behavior impacts individual accountants and places blame on the whole audit industry.
