CPA here. Former Big 4 Auditor. Have done said cash confirm procedures many times. Wanted to a share a few thoughts, FWIW.

Cash Confirm Procedures.

These simply confirm a cash balance. The "unencumbered" written in the report after each balance is awkward, with no clarification as to the definition in the context of the report. I personally interpret that to mean unrestricted, non-escrow account, which I would expect this entity to hold their cash in--doesn't give me any additional confidence whether it was stated or not.

It's important to note that without a full audit, you're only seeing a third of the balance sheet categories right now. We have no information as to the entity's liabilities, and let's ignore equity for this discussion.

Without a full audit, we have no evidence that the entity has net assets. They could have $1 or $2.5B in liabilities, for all we know, thus rendering the true cash backing USDT (net of liabilities) unknowable

In my professional opinion, I do gain some confidence from the cash balances reported, but seeing only a portion of the balance sheet, the cash balances do little for me overall.

Additional note: the sentence in the report: "FSS did not provide the Tether personnel with any advance notice, nor did FSS provide Tether the account balance information gathered from the two banks prior to receiving the Tether balance information."

This also means nothing to me... The "advanced notice" portion is useless--Tether contracted FSS thus they know the procedures will occur. Also, Tether not providing FSS the bank balances and vice versa also means nothing--in fact, in a normal financial statement audit, you often are provided the balance by the client which you are confirming with the bank, which is totally legitimate. The fact that they didn't share balances doesn't give me any additional confidence, but seems written as if it's supposed to provide an uneducated reader such confidence.

Choice of firm used

Strange to me that a legal firm is performing an accounting firm's role. An entity this large can easily afford a Big 4 accounting firm to perform these procedures. Or even a mid-sized firm, which would provide investors greater confidence over the report. While cash confirm procedures aren't very difficult, would you rather have a plumber or an electrician wire your house?

Also, note that the report reads:

"Judge Eugene R. Sullivan (Ret.), one of the partners, is a member of the advisory board of one of Tether’s banks. It was through this connection that Tether was introduced to FSS. As well, the firm's relationship with the bank allowed for the following review to commence in a timely and comprehensive manner, ensuring that no pertinent information was overlooked in the process."

While AICPA independence codes don't explicitly restrict an auditor from being on the board of a bank for which confirmation procedures will be performed with for a client, this falls into the gray area where the auditor would want to maintain independence "in form AND appearance."

Again, we aren't dealing with an accounting firm here, we're dealing with a legal firm. As I'm a CPA, not a lawyer, I am unaware of the independence rules that lawyers must abide by, and openly stating something like that, I'd imagine they are in the clear. Not ground shattering. However, contextually, Tether has struggled with accusations, and I find it strange that they wouldn't seek out a completely independent, third party accounting firm. Furthermore, the comments regarding the review occurring "timely/comprehensive/ensuring no pertinent information was overlooked" is very, very unprofessional. You wouldn't say something like this in an actual opinion and/or procedures letter, at least coming from an accounting firm, as it opens you up significantly to liability in the advent of a lawsuit. I'm rather surprised a legal firm would issue that in their report.

Final/Overall Thoughts: This report gives me no additional or decreased confidence in Tether. The questions it raises as to their lack of an entire audit, along with choice of firm, leave me with little evidence and don't do much for me.