SEC chief accountant warns accountants of liability when auditing crypto firms

Paul Munter says making or authorizing misleading statements can have serious consequences for accounting firms and individual accountants.

Paul Munter, chief accountant of the United States Securities and Exchange Commission (SEC), issued a statement warning accounting firms of their obligations to the agency when working with crypto companies. Allowing their findings to be distorted could have serious consequences, he said.

Crypto firms can hire accountants to "perform some kind of review of parts of their business, often presented as a so-called 'audit'" and misrepresent the work as being comparable to an audit of financial statements , Munter wrote. This is not only misleading, but may result in legal liability.

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Accounting firms have a legal duty under the Securities Exchange Act of 1934 to seek out illegal activity and report it to the SEC, Munter continued. "Material misstatements" by accountants or their clients could violate both the Securities Exchange Act and the Securities Act of 1933, resulting in censorship or suspension of the firm. These provisions may also apply to individuals.

Munter advised accounting firms to consider these issues when onboarding clients and consider contractual prohibitions on certain languages. In response to the misleading statements, the position of the SEC's Office of the Chief Accountant is as follows:

"As good practice, the accounting firm should consider making a loud withdrawal, divorcing itself from the client, including through its own public statements, or, if that is not enough, informing the Commission. "

The independence of the accounting firm is vital, Munter continued, and even the appearance of mutual interest o...