Sam Bankman-Fried single-handedly raised prices for professional accounting services as well as angering global regulators.
The collapse of FTX and the work the auditors did on its books raised alarm signs among companies with crypto firms as customers.
According to the Financial Times, many companies have upgraded their crypto clients to “high risk,” and some have stopped trading with digital asset firms. Audits will now take longer and cost more as accounting rules are more difficult to apply to cryptocurrencies.
In addition, regulators are now watching the books and eager to pounce on cryptocurrency companies after two major crashes this year.
High risk, high cost
When a customer is high risk, “you greatly expand the scope of the audit, and that means you need more resources and more time,” said Jeffrey Weiner, president of Marcum. Marcum audits clients such as Bitcoin mining companies and digital asset investment groups.
He went on to note that companies now have to check “systems, controls, presence of assets, segregation of funds, and in light of FTX, there will be additional scrutiny of related party transactions,” adding that it is all additional work.
FTX prioritized bad accounting, which the SBF itself admitted. The issue wasn’t with cryptocurrency, it was with people and accounting, Blockchain Association attorney Jake Chervinsky noted.
FTX wasn’t a cryptography problem, it was a criminal problem.
A story as old as time: a con artist who tricks unsuspecting victims into giving him their money under the guise of his high morals and trustworthy personality, then runs away with the money.
This has nothing to do with cryptocurrency.
— Jake Chervinsky (@jchervinsky) November 29, 2022
Newly appointed FTX CEO John Ray, who is also an insolvency attorney and expert, said he had never seen “such a complete failure of corporate controls and such a complete absence of reliable financial information.”
It was revealed that FTX had “unqualified audits” from small companies like Prager Metis and Armanino.
Accountants are now in a panic as the end of the US fiscal year approaches. In addition, the “big four” – PwC, Deloitte, KPMG and EY – have a larger arsenal of resources to draw on for crypto companies. They also charge much more than junior accountants.
Accountants: Get to know your clients
In August, the Company’s Public Accounting Oversight Board, the audit regulator in the United States, released a bulleted list specifically related to crypto companies. “What is the auditor’s view of the financial reporting implications of the company’s activities related to digital assets?” Asked.
Many are now comfortable not doing business with crypto companies, and those who do will raise their prices because of the risks and extra work involved. As with most things, these price increases will likely be passed down the chain to the customer.
Post-audit Firms Are Raising Crypto Clients to High Risk: The report appeared first on CryptoPotato.