Start with the question the report actually tested
Identify the legal entity, assets, date and procedure covered. Ask whether the report documents control of addresses, an asset balance, inclusion of selected customer liabilities, or another defined claim. Those are different scopes, even when the marketing label is the same.
The SEC staff bulletin cautions that proof-of-reserves reports are not equivalent to financial statement audits and may omit a complete view of liabilities. It also warns that work by a registered accounting firm can fall outside PCAOB standards and oversight. Read the engagement, not just the firm’s name.
Evidence: Investor.gov: caution with alternatives to financial statement audits
Test the denominator with an invented example
Suppose a fictional report lists $120 of assets against $100 of included customer balances. The reported ratio is 120%. If an additional $40 liability is omitted, $120 divided by $140 is approximately 85.71%. The first ratio was not a complete balance-sheet conclusion.
This example invents every value and alleges nothing about any provider. It illustrates why confirming selected assets is insufficient to infer total net assets. Valuation conventions and restrictions on assets can also matter to the interpretation.
| Assumed scope | Assets | Liabilities considered | Ratio |
|---|---|---|---|
| Selected balances only | $120 | $100 | 120% |
| Including another $40 | $120 | $140 | 85.71% |
Keep timing and enforceability separate
A point-in-time observation does not establish what happens after the observation. Ask about the reporting date, frequency, omitted products and treatment of borrowed or encumbered assets. Record an unanswered question as unknown; do not fill it with a favorable assumption.
Even a positive net-asset figure would not by itself answer whether a particular customer can withdraw a particular asset promptly. Liquidity, operational availability and the customer’s legal claim require different evidence. This checklist makes no legal determination.
Build a scope worksheet rather than a badge
Write down the named entity, report issuer, engagement standard, assets covered, liabilities covered, valuation basis, exclusions and observation date. Separate statements made by the provider from procedures and conclusions stated by the report issuer.
Do not convert the worksheet into a safety score or label a report an audit without reading what it says. If an underlying report cannot be accessed, note that limitation; a promotional summary is not a substitute for inspecting it.
| Question | Evidence needed |
|---|---|
| Which entity and date? | Named scope and observation period |
| Which obligations are included? | Liability definition and exclusions |
| What assurance is expressed? | Engagement and conclusion text |
| What remains unknown? | Explicit limitations and missing evidence |
Use the comparison framework with its limits visible
The CryptoTrades comparison framework helps organize questions; it does not certify reserves or continuously monitor providers. Keep source dates next to findings, and read the original report whenever one is cited.
This article is educational and is not an opinion about a particular institution’s finances. Report corrections with the page URL and public source through Contact. Do not send account records, identity documents or credentials to support a content correction.
Sources & method
- Investor.gov: caution with alternatives to financial statement audits
SEC staff investor bulletin dated July 27, 2023, checked October 29, 2026. Educational context, not an assessment of a named provider. Checked 2026-10-29.
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