Senator Elizabeth Warren Unveils ‘Sham’ Crypto Audit Scheme
- Senator Elizabeth Warren has voiced her concerns about the potential for “sham audits” of cryptocurrency companies.
- PCAOB is authorized and overseen by the US Securities and Exchange Commission (SEC) and is funded by audited public companies.
- Senate Banking Committee that oversees the SEC and will be instrumental in crafting crypto legislation, has been a vocal advocate for greater regulation of the cryptocurrency industry.
Senator Elizabeth Warren, a prominent US lawmaker, has voiced her concerns about the potential for “sham audits” of cryptocurrency companies, which could be contributing to the recent stresses in the US banking system.
With another colleague, Warren has urged the Public Company Accounting Oversight Board (PCAOB) to take action against this practice, citing the potential harm it could cause to the integrity of the auditing system.
The PCAOB is authorized and overseen by the US Securities and Exchange Commission (SEC) and is funded by audited public companies. Warren and her colleague have argued that the watchdog has more legal reach than it is currently exercising and has a “broad responsibility” to protect the integrity of the auditing system. They have called on the board to take action against sham audits, which they say mislead the public and threaten the integrity of the auditing system.
The issue of crypto auditing has been a topic of discussion in recent months, with the PCAOB acknowledging the potential problem and stating its concerns in a letter to the lawmakers. PCAOB Chair Erica Williams wrote in a February response letter shared by the lawmakers that she is concerned when the auditors her organization oversees “perform ‘sham audits’ – even for entities whose audits generally fall outside of our jurisdiction”.
Unfortunately, the PCAOB faces statutory limits when regulating certain cryptocurrency companies’ audits, according to Williams. However, Warren and her colleague argue that the board has more legal reach than it lets on and that it can act with broad responsibility to protect the integrity of the auditing system. The lawmakers’ letter to the PCAOB followed a warning from the watchdog’s inspector general that reserve reports from crypto companies were often based on untrustworthy information rather than genuine auditing.
Warren, on the Senate Banking Committee that oversees the SEC and will be instrumental in crafting crypto legislation, has been a vocal advocate for greater regulation of the cryptocurrency industry. As the use of digital assets becomes more widespread, there is growing concern about the risks posed by this relatively unregulated sector, particularly concerning the potential for money laundering and other criminal activities. The call for action against sham audits is just one part of a wider push to ensure that the cryptocurrency industry is subject to the same level of scrutiny and regulation as traditional financial markets.
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