The Securities and Exchange Commission staff office of the Chief Accountant has issued a statement by Paul Munter, Chief Accountant, overviewing the legal risks of accounting firms that run afoul of the antifraud provisions of federal securities laws. He particularly mentions some firms that perform reviews of certain parts of their customer businesses and present these as Audits. This has ap prently been the case with the crypto industry, particularly crypto asset trading platforms. He points out that any person that knowingly or recklessly provides substantial assistance to another person in violation of the Securities Act shall be deemed in violation themselves.
The statement stresses the rules requiring audit firms to remain independent from the client both in fact and appearance in performing the audit. The Office of the Chief Accountant of the SEC says that an accounting firm continuing to accept engagements from a client while knowing the client is using the firm to perpetrate a fraud is inherently misleading. The Regulations also requires audit firms to adopt procedures to detect illegal acts in connection with their audits and report to the issuer and if necessary the Commission the illegal acts that have been committed. Here is the full statement:https://www.sec.gov/news/statement/munter-statement-crypto-072723
Jeffrey Newman is a whistleblower lawyer representing whistleblowers under the SEC whistleblower program. He also represents whistleblower under the False Claims Act. He can be reached at Jeff@Jeffnewmanlaw.com or 617-823-3217
