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"To prepare a proof of reserves report, an auditor uses procedures agreed with the company but does not vouch for whether those procedures are appropriate. The

"To prepare a proof of reserves report, an auditor uses procedures agreed with the company but does not vouch for whether those procedures are appropriate. The auditor also does not give any assurance or opinion over the numbers in the report, as it would in a full financial audit." What does it say that a lower-tier accounting firm wouldn't even complete this garbage process?

jacquesm 4y ago
Mazars is not lower tier. They're not in the big four but they are quite large and well respected, at least they were until they - and BDO, another large accounting firm - were flagged as insufficient in terms of oversight by the UK regulators. See: https://www.bloomberg.com/news/articles/2022-07-20/mazars-bdo-audit-quality-unacceptable-uk-watchdog-says https://www.bloomberg.com/news/articles/2022-07-20/mazars-bd... So they're on thin ice and they will not risk going down with this particular ship.
- ProjectArcturis 4y ago
  >Mazars is not lower tier. I don't know much about European accounting firms. But the rest of your comment seems to contradict your initial claim -- i.e. they are not Big Four and they have had a recent scandal.
  - jacquesm 4y ago
    They are in the top 10 in my country and in many others, and they have been cautioned, which is regulator speech for 'improve your act or we'll go after you'. That means that they are on thin ice with respect to any future mistakes (specifically in their crypto division) and that their reputation (for the whole company) is at risk. The effect is that they will go through their customer portfolio and decide which ones they feel are negatively affecting their risk profile and apparently this is one risk that they are not willing to take. If this was a canary in the coalmine it just started wheezing strangely and it looks a little dizzy.
    - leereeves 4y ago
      I may have misunderstood. The first paragraph of your comment seems reassuring (like it's just risk aversion at Mazars) but then: > If this was a canary in the coalmine it just started wheezing strangely and it looks a little dizzy. sounds like a reason to leave the mine (i.e. there's something really wrong and this is a warning sign).
      - jacquesm 4y ago
        If it sounded reassuring to you then I should work on my writing skills, it certainly wasn't meant that way. > sounds like a reason to leave the mine. Absolutely, if you have funds in this - and any other unaudited - exchange GTFO or you may lose everything. Either their claim that they have the funds is real and you get your money and later you can re-deposit it or you'll be at least not one of the ones left holding the bag.
        kurthr 4y ago
        I read it as a mid-tier accounting firm selling their seal of approval to raise income on sketchy accounts. That's not really news (or effective) unless the accounting firm has some respectability (like Aurthur Anderson ;^).
        jacquesm 4y ago
        I've been in the financial services world since 2007 and have come across Mazars about as often as I've seen work from the big 4, they're simply a bit lower on the totem pole image wise but their non-crypto departments deliver pretty solid work. The big differentiators are the price point and their ability to create an army of consultants on a moments notice where required. The big four clearly have an edge in those cases - at a price. If Mazars is heading out the door you should try to beat them to the curb.
      - ip26 4y ago
        In this analogy, the canary is Mazars and the mine is crypto. Nothing about the comment is reassuring for crypto.
  - Closi 4y ago
    > the rest of your comment seems to contradict your initial claim -- i.e. they are not Big Four and they have had a recent scandal. It doesn't contradict it IMO: 1) In terms of the criticism from the FRC (which I believe is the 'scandal' you are talking about) KPMG were also criticised by the FRC so also would fall foul of this. 2) Just because a company isn't one of the 'big four' doesn't mean that they are lower tier.
  - hef19898 4y ago
    EY was the Wirecard's auditor, and PwC did an ad-hoc audit of the same before everything fell apart.
- rchaud 4y ago
  They are by definition lower-tier, as they don't have the resources to run an audit for a firm that purportedly maintains billions in reserves. A contract of that size wouldn't end up at a regional arm in South Africa anyway. Big 4 auditors aren't exactly cheap, but there is a reason why they audit all the major firms. Mazar's biggest customer appears to be the Trump Organization.
  - jacquesm 4y ago
    > as they don't have the resources to run an audit for a firm that purportedly maintains billions in reserves I don't think the resources are the real problem. The real problem is that Mazars has already been cautioned and they know full well that if Binance goes under their reputation is toast if they keep underwriting them.
  - wjnc 4y ago
    Auditing a firm is not an act of charity. It’s a contract. Binance has either asked zero accountants to audit their billions in reserves, or zero have taken the job. Mazars international probably got scared and leaned on the partner. The auditing of a firm this size is usually not a very big deal and nowhere near the capacity of a partner with all the roles below.
- prepend 4y ago
  They are big, but definitely lower tier. They aren’t even in the top 10 globally, so literally lower tier. For example, the smallest of the big4 had $32B just in its audit and accounting section. Mazars had $2B in its entire organization, including advisory.
- gamblor956 4y ago
  Mazars and BDO are large yes, but they're not well respected. Over the past decade, both have had the ignominious distinction of having the worst PCAOB review scores of the top 100 accounting firms. It appears that their auditing practices in the U.K. aren't any better. (And both Mazars and BDO provided tax and auditing services to the Zuma and Ramaphosa administrations in South Africa, though this is because BDO's former S.A. member firm became Mazar's S.A. member firm.) A large part of my early career in tax was fixing the mistakes made by tax advisors at these two firms. Those who know, avoid BDO. (And Mazars too. They're actually worse.)
  - elkos 4y ago
    Is there a resource to look up such things for future reference? Furthermore, are any open-source projects familiar with any of these top 100 accounting firms?
  - jacquesm 4y ago
    Interesting, ok, I'll take your point, you clearly have had more exposure to them than I have.
xiphias2 4y ago
Cz said to CNBC that the big four can't audit a crypto exchange. Then the reporters told him that Coinbase is audited by Deloitte. He didn't really have an answer, it's quite awkward clip.
- cokeandpepsi 4y ago
  stinks arthur anderson isn't around anymore, problems like this is what they were made for
  - jacquesm 4y ago
    They are no longer around for a very good reason. And Mazars is likely well aware of that reason.
  - bambax 4y ago
    "Stop the shredding!"
  - mtremsal 4y ago
    Does Mazars have a consulting arm ready to spin off if the audit side runs into a brand-killing debacle? Edit: they do! Maybe they can rebrand as “Emphasast”, to put the emphasis on the past. :D
    - jacquesm 4y ago
      https://www.mazars.com/Home/Services/Consulting https://www.mazars.com/Home/Services/Consulting
- orwin 4y ago
  Nothing to do with crypto and TFA: I disliked working with Deloitte at my first real job, i thought they were asking too much details and putting some useless constraints that had nothing to do with opsec in real life, and that we (me and the manager) had to lightly bullshit through. Then I worked at a big bank, with an internal audit team, and tbh, I think retrospectively working with Deloitte was the best experience I could have, they are really professional and their price is less surprising to me now. Looking back, i just didn't know better.
mtremsal 4y ago
What does it even mean to audit a company that doesn’t follow or reconcile to GAAP (or equivalent)? Are there examples in any other industries?
- vkou 4y ago
  It means you told the auditor how you want to be audited, and they did it. Generally speaking, if you look hard enough, you could find an auditor that will happily audit your number of nosehairs, or talking parrots, or not ask too many questions about whether or not your shitcoins reserves are actually worth XY billion. You may need to scrape the bottom of the barrel for that, though.
  - mtremsal 4y ago
    Mazars is supposed to be quite reputable. How they would agree to this, and endanger their entire firm, is beyond me. But then again, plenty of VCs also agreed to lend their reputation (and capital) to crypto firms with opaque finances and governance… I hope this turns into a lasting scarlet letter.

jacquesm 4y ago

Mazars is not lower tier. They're not in the big four but they are quite large and well respected, at least they were until they - and BDO, another large accounting firm - were flagged as insufficient in terms of oversight by the UK regulators. See: https://www.bloomberg.com/news/articles/2022-07-20/mazars-bdo-audit-quality-unacceptable-uk-watchdog-says https://www.bloomberg.com/news/articles/2022-07-20/mazars-bd... So they're on thin ice and they will not risk going down with this particular ship.

ProjectArcturis 4y ago
>Mazars is not lower tier. I don't know much about European accounting firms. But the rest of your comment seems to contradict your initial claim -- i.e. they are not Big Four and they have had a recent scandal.
- jacquesm 4y ago
  They are in the top 10 in my country and in many others, and they have been cautioned, which is regulator speech for 'improve your act or we'll go after you'. That means that they are on thin ice with respect to any future mistakes (specifically in their crypto division) and that their reputation (for the whole company) is at risk. The effect is that they will go through their customer portfolio and decide which ones they feel are negatively affecting their risk profile and apparently this is one risk that they are not willing to take. If this was a canary in the coalmine it just started wheezing strangely and it looks a little dizzy.
  - leereeves 4y ago
    I may have misunderstood. The first paragraph of your comment seems reassuring (like it's just risk aversion at Mazars) but then: > If this was a canary in the coalmine it just started wheezing strangely and it looks a little dizzy. sounds like a reason to leave the mine (i.e. there's something really wrong and this is a warning sign).
    - jacquesm 4y ago
      If it sounded reassuring to you then I should work on my writing skills, it certainly wasn't meant that way. > sounds like a reason to leave the mine. Absolutely, if you have funds in this - and any other unaudited - exchange GTFO or you may lose everything. Either their claim that they have the funds is real and you get your money and later you can re-deposit it or you'll be at least not one of the ones left holding the bag.
      - kurthr 4y ago
        I read it as a mid-tier accounting firm selling their seal of approval to raise income on sketchy accounts. That's not really news (or effective) unless the accounting firm has some respectability (like Aurthur Anderson ;^).
        jacquesm 4y ago
        I've been in the financial services world since 2007 and have come across Mazars about as often as I've seen work from the big 4, they're simply a bit lower on the totem pole image wise but their non-crypto departments deliver pretty solid work. The big differentiators are the price point and their ability to create an army of consultants on a moments notice where required. The big four clearly have an edge in those cases - at a price. If Mazars is heading out the door you should try to beat them to the curb.
    - ip26 4y ago
      In this analogy, the canary is Mazars and the mine is crypto. Nothing about the comment is reassuring for crypto.
- Closi 4y ago
  > the rest of your comment seems to contradict your initial claim -- i.e. they are not Big Four and they have had a recent scandal. It doesn't contradict it IMO: 1) In terms of the criticism from the FRC (which I believe is the 'scandal' you are talking about) KPMG were also criticised by the FRC so also would fall foul of this. 2) Just because a company isn't one of the 'big four' doesn't mean that they are lower tier.
- hef19898 4y ago
  EY was the Wirecard's auditor, and PwC did an ad-hoc audit of the same before everything fell apart.
rchaud 4y ago
They are by definition lower-tier, as they don't have the resources to run an audit for a firm that purportedly maintains billions in reserves. A contract of that size wouldn't end up at a regional arm in South Africa anyway. Big 4 auditors aren't exactly cheap, but there is a reason why they audit all the major firms. Mazar's biggest customer appears to be the Trump Organization.
- jacquesm 4y ago
  > as they don't have the resources to run an audit for a firm that purportedly maintains billions in reserves I don't think the resources are the real problem. The real problem is that Mazars has already been cautioned and they know full well that if Binance goes under their reputation is toast if they keep underwriting them.
- wjnc 4y ago
  Auditing a firm is not an act of charity. It’s a contract. Binance has either asked zero accountants to audit their billions in reserves, or zero have taken the job. Mazars international probably got scared and leaned on the partner. The auditing of a firm this size is usually not a very big deal and nowhere near the capacity of a partner with all the roles below.
prepend 4y ago
They are big, but definitely lower tier. They aren’t even in the top 10 globally, so literally lower tier. For example, the smallest of the big4 had $32B just in its audit and accounting section. Mazars had $2B in its entire organization, including advisory.
gamblor956 4y ago
Mazars and BDO are large yes, but they're not well respected. Over the past decade, both have had the ignominious distinction of having the worst PCAOB review scores of the top 100 accounting firms. It appears that their auditing practices in the U.K. aren't any better. (And both Mazars and BDO provided tax and auditing services to the Zuma and Ramaphosa administrations in South Africa, though this is because BDO's former S.A. member firm became Mazar's S.A. member firm.) A large part of my early career in tax was fixing the mistakes made by tax advisors at these two firms. Those who know, avoid BDO. (And Mazars too. They're actually worse.)
- elkos 4y ago
  Is there a resource to look up such things for future reference? Furthermore, are any open-source projects familiar with any of these top 100 accounting firms?
- jacquesm 4y ago
  Interesting, ok, I'll take your point, you clearly have had more exposure to them than I have.

xiphias2 4y ago

Cz said to CNBC that the big four can't audit a crypto exchange. Then the reporters told him that Coinbase is audited by Deloitte. He didn't really have an answer, it's quite awkward clip.

cokeandpepsi 4y ago
stinks arthur anderson isn't around anymore, problems like this is what they were made for
- jacquesm 4y ago
  They are no longer around for a very good reason. And Mazars is likely well aware of that reason.
- bambax 4y ago
  "Stop the shredding!"
- mtremsal 4y ago
  Does Mazars have a consulting arm ready to spin off if the audit side runs into a brand-killing debacle? Edit: they do! Maybe they can rebrand as “Emphasast”, to put the emphasis on the past. :D
  - jacquesm 4y ago
    https://www.mazars.com/Home/Services/Consulting https://www.mazars.com/Home/Services/Consulting
orwin 4y ago
Nothing to do with crypto and TFA: I disliked working with Deloitte at my first real job, i thought they were asking too much details and putting some useless constraints that had nothing to do with opsec in real life, and that we (me and the manager) had to lightly bullshit through. Then I worked at a big bank, with an internal audit team, and tbh, I think retrospectively working with Deloitte was the best experience I could have, they are really professional and their price is less surprising to me now. Looking back, i just didn't know better.

mtremsal 4y ago

What does it even mean to audit a company that doesn’t follow or reconcile to GAAP (or equivalent)? Are there examples in any other industries?

vkou 4y ago
It means you told the auditor how you want to be audited, and they did it. Generally speaking, if you look hard enough, you could find an auditor that will happily audit your number of nosehairs, or talking parrots, or not ask too many questions about whether or not your shitcoins reserves are actually worth XY billion. You may need to scrape the bottom of the barrel for that, though.
- mtremsal 4y ago
  Mazars is supposed to be quite reputable. How they would agree to this, and endanger their entire firm, is beyond me. But then again, plenty of VCs also agreed to lend their reputation (and capital) to crypto firms with opaque finances and governance… I hope this turns into a lasting scarlet letter.