Mazars hit the headlines again this year after it confirmed it was ceasing operations for crypto clients including Crypto.com, KuCoin and Binance, the world’s largest crypto exchange.
The news, which rocked the cryptocurrency world, comes after the accounting firm walked away from another high-profile client in February, former President Donald Trump.
On Friday, Mazars told Yahoo Finance that it had “ceased its provision of Proof of Reserves reports for entities in the cryptocurrency sector due to concerns about how those reports are perceived by the public.”
Here’s what else you need to know about an accounting firm.
What is Mazars?
Mazars is an international professional services firm that provides a variety of financial services, including audit (49%), tax (16%) and outsourcing (16%), according to the company’s 2020/2021 transparency report.
It operates in 90 countries, but most of its offices and professionals are located in the European region. Mazars has 12 offices in the US, including California, New York, Texas and Florida.
In 2021, Mazars reported fee income of $2.22 billion (€2.1 billion).
What services has Mazars provided to crypto firms?
Mazars has released Proof of Reserve (PoR) reports for cryptocurrency exchange clients. The purpose of PoR reports is to verify that exchanges have sufficient assets to support customer balances.
“It’s something that’s been talked about more and more since the collapse of FTX,” said TechCrunch senior writer Romain Dillet. “Basically, it’s like saying: “Here’s what I have in my wallet, and here’s what my customers keep on my exchange.”
Finally, the exchanges wanted to provide assurances to customers.
“If everyone tries to withdraw everything at the same time, exchanges with higher reserves than customer deposits will be able to process all the withdrawal requests,” Dillett said.
For example, Binance explained its PoR system on its website after the FTX crash and showed a 101% Bitcoin reserve ratio. Crypto.com has also posted its Mazars PoR report on its website with an option to verify customer funds.
However, the Mazars PoR report specifically states that these are not financial audit engagements and the firm does not express an opinion or assurance.
The Mazars report on Binance’s BTC reserve is no longer available on the company’s website. Mazars has removed all evidence reporting on cryptocurrency exchanges, according to TechCrunch, and Mazars currently does not list “cryptocurrency” or “blockchain technology” as an industry it serves on its website.
Why did the Mazars retreat?
After releasing PoR reports for Cyrpto.com and KuCoin earlier this month, Mazars said it was discontinuing these reports due to concerns about how the reports were being interpreted by the public, according to a statement provided to Yahoo Finance. :
“Proof-of-reserves reports are prepared in accordance with reporting standards consistent with agreed-upon procedures,” the statement said. “They are neither an assurance nor an audit opinion on the subject matter. Instead, they report limited findings based on agreed-upon procedures performed on the subject over a historical period.
What was Mazars’ relationship with Trump like?
Earlier this year, Mazars cut ties with another high-profile client, former President Donald Trump, and his family business.
Trump used Mazars as his longtime accounting firm, whose services included issuing reports on the former president’s finances. These statements included valuations of Mr. Trump’s assets, including real estate. However, A letter to the Trump Organization in FebruaryWilliam Kelly, general counsel at Mazars US, said Trump’s financial statements from June 30, 2011 to June 30, 2020 “should no longer be relied upon.”
The accounting firm also said they would no longer provide any services to Trump and his businesses.
What are the legal responsibilities of accounting firms?
Mazars, like every other accounting firm and its CPAs, is bound by standards such as good faith, due professional care and public interest.
Companies have a legal responsibility to ensure that financial statements are properly prepared. Otherwise, customers, investors, or third parties who rely on their work may sue for negligence or fraud.
In the past, accounting firms have collapsed due to bad audits. Arthur Andersen, once a Big 5 accounting firm along with PwC, KPMG, EY and Deloitte, collapsed in 2002 due to its involvement in the Enron scandal.
Andersen turned a blind eye when Enron Corp. misstated financial statements to mislead investors. The lead audit partner failed to report the problems to the company’s board and tried to cover up the fraud as a result of an investigation by the Securities and Exchange Commission.
Mazars reminded the Trump Organization that “Mazars performed its work in accordance with professional standards” in its separation letter in February. Mazars has again reminded the public of its commitment to reporting standards as it ceases work related to cryptocurrency.
Mazars did not provide additional information to Yahoo Finance regarding its suspension decision.
Rebecca is a reporter for Yahoo Finance.
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