Democratic Sens. Elizabeth Warren of Massachusetts and Ron Wyden of Oregon are raising concerns over a government audit-overseer's credibility following the fallout from failed cryptocurrency exchange FTX.
Warren and Wyden criticized the Public Company Accounting Oversight Board, saying it must act to “maintain its rigorous standards for audit firms.”
Questionable accounting practices in the crypto industry raise concerns and underscore the need for the PCAOB to act to ensure accountability, the lawmakers said in a letter sent to the accounting watchdog on Thursday.
Warren and Wyden asked the PCAOB several questions, including whether it would commit to using its authority to evaluate and publicly report on auditors that provided services for any crypto company acting as a broker-dealer, even if the firm was not registered with the Securities and Exchange Commission.
The senators want a response from the PCAOB by Feb. 8.
Warren and Wyden said some large accounting firms involved with FTX failed to find abnormalities at the exchange, such as the lack of record keeping and failure of corporate controls. The lawmakers also criticized proof-of-reserves examinations done by crypto firms and said they fall short — in part because they are not overseen by the PCAOB.
The PCAOB is tasked with overseeing the audits of public companies, as well as brokers and dealers registered with the Securities and Exchange Commission.
“When PCAOB-registered auditors perform sham audits – even for firms that may lay outside of the PCAOB’s jurisdiction – they tarnish the credibility of the PCAOB and undermine confidence in the PCAOB-registered auditors that investors and the public rely on when making investment decisions,” the lawmakers wrote.
The PCAOB did not immediately respond to a request for comment.
Disclaimer: Beginning in 2021, Michael McCaffrey, the former CEO and majority owner of The Block, took a series of loans from founder and former FTX and Alameda CEO Sam Bankman-Fried. McCaffrey resigned from the company in December 2022 after failing to disclose those transactions.
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