Coming home for Christmas. Sam Bankman-Fried will no longer contest his extradition to the United States and who can blame him? The Fox Hill Prison, where he is being held, is known for rodent infestations and an overreliance on buckets as toilets. SBF’s request for a special vegan diet then may find itself a little lower down the clearly stretched facility’s to-do list.

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The lowdown

• 🐦 Elon Musk’s family office is leading efforts to raise fresh equity for Twitter at $54.20 – the takeover price.

• 📊 AND Elon is conducting a poll to determine whether he should step down as Twitter CEO.

• 📺 Games Workshop shares rise 14% after it signed a deal with Amazon to create a Warhammer TV series.

Flex your finance muscle 💸💪

Agreed-Upon Procedures

(And why they are not audits.)

Last week, we gave a brief explanation of why Agreed-Upon Procedures (AUPs) are not audits. Let’s go into a little more detail.

An auditor and a client can agree on a set of procedures that the auditor will follow to gather evidence and report on specific information or assertions made by the client. These are known as AUPs. An audit, on the other hand, is a broader term that refers to the process of examining and verifying the accuracy and reliability of financial statements or other information.

AUPs will be narrower in scope than a full audit and are used when the client or another interested party needs assurance on specific aspects of the client's financial statements or other information but does not need (or does not want) a full audit.

See our featured stories below to see why AUPs are making the news.

Featured Stories

Mazars auditors walk away from crypto audits

Accounting firm Mazars has said that they will no longer take on ‘Proof-of-reserves’ (PoR) reports engagements “due to concerns regarding the way these reports are understood by the public”. The firm then deleted the website that hosted these reports for cryptocurrency exchanges.

PoR reports are produced after a set of AUPs are completed rather than an audit. Investor Michael Burry, played by Christian Bale in The Big Short, recently commented that these AUPs are “essentially meaningless”.

Indeed, there are many issues with relying on these reports. For example, it may be agreed that only assets are examined, not liabilities. This could mean that borrowed funds are not identified and a net assets picture could look very different. It could also be that while the assets may exist, the value of these assets may be overstated in a ‘bank run scenario’ – think the FTT token.

Mazars had provided PoR reports to Binance which has experienced $6 billion of withdrawals in the last week. The level of withdrawals seen indicates that customers do perhaps understand the shortcomings of such reports. It may be that Mazars are more concerned about the blowback.

The Big Four accounting firms are currently unwilling to offer these reports. These large firms have learnt the hard way that reputational damage can easily outweigh audit fees. Remember when it was the Big Five?

The content we're consuming today

• Wired: Winging It: Inside Amazon’s Quest to Seize the Skies.

• BlackRock: 2023 Global Outlook.

Off-balance sheet items

• Forbes: Formula 1’s Highest-Paid Drivers 2022: Max Verstappen Zooms Past Lewis Hamilton.

The bottom line