Audit Watchdog Urges ‘Extreme Caution’ on Crypto Reserve Reports

Investors cannot rely on narrow, point-in-time snapshots of crypto company reserves even when the reports are authorized by audit firms, the US audit regulator’s office of the investor advocate warned Wednesday.

“Proof of reserve reports are inherently limited, and customers should exercise extreme caution when relying on them to conclude that there are sufficient assets to meet customer liabilities,” the Public Company Accounting Oversight Board’s office of the investor advocate said in an investor alert.

Proof of reserve reports—touted by crypto companies as proof of their viability after the collapse of crypto exchange FTX—do not report liabilities, and provide ...