Is a proof-of-reserves report the same as an audit?

No. PCAOB staff said in a March 2023 investor advisory that proof-of-reserve engagements are not audits, are not performed under PCAOB auditing standards, are not subject to PCAOB inspection, and do not provide any meaningful assurance to investors. They concern assets at a moment, not the full financial position.

What is the difference between reasonable, limited and no assurance?

Reasonable assurance, from an audit or an examination, is a high but not absolute level of confidence based on extensive evidence. Limited assurance, from a review, means the accountant is not aware of material changes needed, based on inquiry and analysis. Agreed-upon procedures give no assurance: the accountant performs steps the client specified and reports what was found, without concluding on the assertion.

How often do audits and attestations happen?

Audits are usually annual, covering a fiscal year and issued months later. Reserve attestations are often monthly or more frequent, each covering a single date. Frequency is a strength of attestations; breadth is a strength of audits. Neither covers what happens between dates.

What should I look for in a reserve attestation?

The type of engagement (examination, review or agreed-upon procedures), the exact assertion tested, the date or period, whether liabilities and all tokens outstanding were included, how assets were valued, whether encumbrances were considered, who performed it and under which standards, and whether the provider is a registered accounting firm.

Attestation vs Audit

Tokenized Real-World Assets

Definition

An audit is an examination of an entity's complete financial statements, assets, liabilities, income and cash flows, by an independent accountant under auditing standards, ending in an opinion on whether the statements are fairly presented; audits of public companies and broker-dealers are performed under PCAOB standards and subject to PCAOB inspection. An attestation engagement reports on a narrower subject, such as management's assertion that reserves equal or exceed tokens outstanding on a date. Attestations come in three forms under the AICPA's attestation standards: an examination, which gives reasonable assurance; a review, which gives limited assurance; and agreed-upon procedures, which give no assurance and report only the findings of procedures the client chose. Reserve and proof-of-reserve reports are attestations or agreed-upon procedures, not audits, and they are only as useful as their scope.

Why it matters

Tokenized products often describe their reporting with the same words, 'audited', 'verified', 'attested', for very different documents. An audited fund with a registered firm's opinion on its full financial statements is a different level of evidence from a monthly agreed-upon-procedures letter confirming a custodian balance. Both can be useful; they answer different questions. The PCAOB staff advisory exists because investors treated the narrower documents as if they were audits. When AltStreet reviews a tokenized issuer, it names the type of report, the firm, the standard and the scope, and does not let an attestation stand in for an audit or a balance for a balance sheet.

Common misconceptions

•'Attested' does not mean 'audited'. An attestation covers a specific assertion; an audit covers the full financial statements.
•Agreed-upon procedures are not assurance. They report findings from steps management chose.
•Monthly reports are not more rigorous because they are frequent. They are narrower and cover single dates.
•A well-known firm's name on a report does not change its type. Read the engagement description.
•An audit is not a guarantee. It gives reasonable assurance about the statements at their date, not about the future.

Technical details

Side by side

Scope: audit, complete financial statements; attestation, a specific assertion such as reserves at a date; agreed-upon procedures, specified steps only.

Assurance: audit, reasonable (opinion); examination, reasonable; review, limited; agreed-upon procedures, none.

Timing: audit, a fiscal year, issued later; attestation, a date or short period, often monthly.

Standards and oversight: audits of public companies and broker-dealers under PCAOB standards with PCAOB inspection; other audits and attestations under AICPA standards; some reserve reports by non-accountant providers under no common standard.

Liabilities: audits cover them; reserve attestations often do not.

Reports tokenized issuers publish, from AltStreet's reviews

Franklin FOBXX: annual financial statements audited by PwC, plus registered money market fund portfolio reports.

Figure YLDS: KPMG-audited annual statements and unaudited quarterly reports with reserve schedules.

Superstate: named fund auditors (PwC for USTB, EY for USCC, Deloitte for CUSHY; none yet for VBDC); figures on its pages are unaudited.

Ondo: BPM LLP named as OUSG's auditor in its Form ADV; daily and monthly attestation reports for USDY.

Payment stablecoins: under the definition SEC staff used before the GENIUS Act takes effect, issuers publish a monthly attestation report by a registered public accounting firm on reserve composition and whether reserves equal coins outstanding.

Reading checklist

Report type and standard, stated in the accountant's report.

The assertion or statements covered, and the date or period.

Whether liabilities, all chains' supply and encumbrances are in scope.

Valuation basis for assets (market value or amortized cost).

The provider's registration and independence.

How investors apply the term

Investors usually apply this term by tying the definition back to the controlling documents and then asking which cash flows, rights, restrictions, or valuation assumptions it changes. A useful review looks at the term alongside fees, leverage, liquidity, reporting frequency, and manager discretion rather than treating it as a standalone concept.

The practical diligence test is simple: identify who benefits if the assumption is wrong, who has control when conditions change, and what evidence the investor receives after closing. Terms that cannot be reconciled to documents, cash movements, and monitoring data should be treated as marketing shorthand until proven otherwise.

Frequently asked questions

Is a proof-of-reserves report the same as an audit?: No. PCAOB staff said in a March 2023 investor advisory that proof-of-reserve engagements are not audits, are not performed under PCAOB auditing standards, are not subject to PCAOB inspection, and do not provide any meaningful assurance to investors. They concern assets at a moment, not the full financial position.
What is the difference between reasonable, limited and no assurance?: Reasonable assurance, from an audit or an examination, is a high but not absolute level of confidence based on extensive evidence. Limited assurance, from a review, means the accountant is not aware of material changes needed, based on inquiry and analysis. Agreed-upon procedures give no assurance: the accountant performs steps the client specified and reports what was found, without concluding on the assertion.
How often do audits and attestations happen?: Audits are usually annual, covering a fiscal year and issued months later. Reserve attestations are often monthly or more frequent, each covering a single date. Frequency is a strength of attestations; breadth is a strength of audits. Neither covers what happens between dates.
What should I look for in a reserve attestation?: The type of engagement (examination, review or agreed-upon procedures), the exact assertion tested, the date or period, whether liabilities and all tokens outstanding were included, how assets were valued, whether encumbrances were considered, who performed it and under which standards, and whether the provider is a registered accounting firm.