USD Tether Transparency Update - It's Not What It Seems

Tether Limited released a report from Friedman LLP on the results of the procedures performed in regards to Tether's bank balances. However, as any accountants will be able to tell you, this report should NOT be relied upon. There are many reasons for this.   

This is NOT an audit. In accounting, there are different reports that public accountants can issue. Without going into details of all the other reports, the report issued by Friedman is a report that provides the least/none amount of assurance and is the option with the lowest cost. This type of report does not provide any assurance because the procedures performed by Friedman are pre-determined by Tether Limited. As this is not an audit, Friedman LLP do not perform any procedure that it believes is needed to validate that tether has enough cash to back its tokens. Instead, Friedman only performed procedures that Tether tells them to and report back on the results of those procedures, which is what this report is about. This is further supported by these notes in the report:   

This information is intended solely to assist the management of Tether Limited ("management"), and solely for management's use, and is not intended to be, and should not be, used or relied upon by any other party.

Since the procedures performed provide no assurance, that is why Friedman included this comment.

Our services were performed under Statements on Standards for Consulting Services issued by the American Institute of Certified Public Accountants (“AICPA”). Procedures performed are outlined in section III of this report. Those procedures were reviewed by you and were limited in nature and extent. We make no representation regarding the sufficiency for your purposes of the procedures selected, and those procedures do not necessarily disclose all significant matters about the Client or reveal errors in the underlying information, instances of fraud, or illegal acts, if any. This engagement does not contemplate tests of accounting records or the performance of other procedures performed in an audit or attest engagement. Our procedures performed are not for the purpose of providing assurance and are limited to the findings listed below as of September 15, 2017 at 8:00PM.

Note 2: FLLP did not evaluate the terms of the above bank accounts and makes no representations about the Client ‘s ability lo access funds from the accounts or whether the funds are committed for purposes other than Tether token redemptions. 

Note 3: Per inquiry with Client, in order to reconcile to the total Tether balance issued and outstanding in the trial balance, the total amount of Tether tokens held in the Treasury address must be subtracted from the total Tether token activity reflected on Omniexplorer. info when viewing activity in the Creation address. The Creation address is reportedly inclusive of all Tether tokens issued and tokens in the Treasury address are within the control of client, therefore the tokens in the Treasury address do not represent outstanding customer accounts that can be redeemed.    

The reconciliation was perform based on Tether's recommendation, not based on how the auditor thinks it should be reconciled. If this report provided any assurance, the auditor should be developing its own procedures rather than having the client teach them how to perform the reconciliation.

These disclosures by Friedman are important and should be taken into consideration when you are interpreting the results from this report.