Public Company Accounting Oversight Board(PCAOB), an industry-funded watchdog working under the authority of the U.S. Securities and Exchange Commission, warns investors not to trust third-party verification or Proof-of-reserves reports, according to a press release.

"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." PCAOB wrote in the statement.

"...investors should note that PoR engagements are not audits and, consequently, the related reports do not provide any meaningful assurance to investors or the public." PCAOB added.

As per the PCAOB, these asset verifications only provide a basic snapshot and fail to take into account the crypto entity's liabilities, the digital asset holders' rights and responsibilities, or whether the assets were borrowed by the entity to fabricate adequate collateral. It's important to note that these documents do not demonstrate anything about a company's internal controls or governance, as stated by the board.
PCAOB pointed out that it's important to note PoR (Proof of Reserves) Reports are not on par with, nor more thorough than, an audit, and they do not comply with PCAOB auditing standards. Moreover, there is a lack of consistency in terms of the service providers that carry out PoR engagements. While some accounting firms handle these engagements, others are managed by non-accountant assurance providers. Furthermore, the crypto entity's management retains the freedom to decide whether or not to disclose the outcomes of PoR reports, including the scope and structure of the information disclosed.