Recently, the Public Company Accounting Oversight Board (PCAOB), a regulator that oversees audits of publicly traded companies in the United States, advised investors warned for Proof-of-Reserves (PoR) reports from accounting firms.
PoR reports do not guarantee asset condition
Supported by the U.S. Securities and Exchange Commission (SEC), the PCAOB stressed that investors should not blindly rely on PoR reports that are not under its oversight and should not rely excessively on such reports. The opinion wrote the following:
Importantly, investors should note that PoR engagements are not audits and, as a result, the related reports do not provide meaningful assurance to investors or the public.
In addition, the board has indicated that PoR reports do not guarantee the condition of assets after the report is published. The PCAOB states that PoRs do not provide insight into asset usage, lending or availability to clients after the report is published. The board further emphasized that PoR reports provide no assurance about the effectiveness of the crypto entity’s internal controls or governance.
Customers should be careful
The board also notes that PoR reports do not meet PCAOB auditing standards. The board also noted a lack of uniformity among service providers preparing PoR reports.
The advisory added: “Proof-of-Reserves reports are inherently limited and clients should exercise extreme caution when relying on these reports to determine whether there are sufficient assets to meet their obligations.”
The warning came as a conclusion after many crypto exchanges joined the trend of providing PoR reports, in an effort to reassure investors about their financial status following the major FTX debacle.