In a recent event, Hester Pierce, commissioner of the United States Securities and Exchange Commission (SEC), took a shot against the regulator on the matters of crypto. The SEC commissioner has targeted the recent warning from the SEC to the accounting firms.
Taking to Twitter to express her opposition, the SEC commissioner argued that full transparency should not come at the cost of compromising good-faith efforts. Pierce referred to the recent warning issued by the SEC to accounting firms cautioning them about the risks and liabilities involved. Largely, the SEC advised accounting firms against taking on non-audit work for crypto firms.
Through her tweets, Pierce challenged the statement made by the SEC’s chief accountant Paul Munter, proposing that accounting firms adopt an all-or-nothing approach in its dealings with crypto firms.
Crypto platforms & their accountants should be clear about what proof of reserves is and isn't & customers should understand the limitations, but why would we want to discourage good-faith efforts to provide more transparency? https://t.co/fsuxUGPrrb
— Hester Peirce (@HesterPeirce) July 27, 2023
To this, she believes that such an approach might cause crypto firms to shy away from making good-faith efforts to be transparent. Pierce adds that crypto firms and accountants should ensure transparency regarding proof of reserves.
However, she believes that specifying what is and isn’t acceptable, she questioned why accounting firms should be cautious of providing assurance work to crypto firms. Her tweet stated:
Why would we want to discourage good-faith efforts to provide more transparency?
On this, Munter had argued that partial engagements might not be a solution and result in crypto firms selectively choosing only certain aspects of the business to show accounting firms and then presenting that information as a full audit to clients. He believes that work beyond a full audit’s scope will lack transparency for investors, noting:
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.”
In response to SEC’s recent warning, Mike Shaub, an auditing and accounting ethics professor at Texas A&M University, mentioned that auditors are obligated by confidentiality, making it challenging to make public statements. He also highlighted the issue of some accounting firms aligning themselves with crypto expertise to boost their reputation but become unresponsive when problems arise.
The recent trend has been to take credit as being cutting edge (e.g., specializing in SPACs or crypto or whatever) to raise the profile, then to be low profile when things go south. That may have triggered SEC interest as well. If the auditor is silent in these cases, beware. 2/2
— Mike Shaub (@mikeshaub) July 28, 2023
Notably, despite belonging to SEC, Pierce has often stood against the agency and the members and their ideal thought process. Infact, she is often found to have troubles with Gary Gensler, chairperson of the agency.
Peirce and Gensler have very contradictory approaches when it comes to regulating the crypto sector. While Peirce often advocates for the sector highlighting its benefits, Gensler criticizes it highlighting the risks involved which is evident through its enforcement oriented approach.
Hence, on one side, SEC continues to introduce antagonistic measures to the crypto industry like increased budget to enhance enforcement or regular warnings to financial firms against crypto exposure, Pierce does the exact opposite. She has repeatedly stood up for comprehensive regulation of the sector and has even went on to appreciate European crypto legislation and UK’s approach to the crypto industry.
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