Binance was simply the last straw for audit firms in crypto. Binance's now-deleted Proof of Reserves only accounted for 14% of their total reserves, which explains why those firms left the industry soon after.

Firstly, Binance initially published a snapshot-based proof of reserves attestation. However, within 24 hours funds were found to be moved that amounted to almost $3 Billion. I broke that news in this post. CZ himself said "If an exchange have to move large amounts of crypto before or after they demonstrate their wallet addresses, it is a clear sign of problems. Stay away".

Some may still give them the benefit of the doubt. Then, Binance published an independently audited PoR(by Mazars). This reported a 101% overcollaterlization however the asset scope of the report only BTC. They reported on-chain BTC reserves of 582,485.9302 BTC at which point BTC was at $16,147 which amounts to $9.4 Billion in BTC reserves(Nov 22nd 2022). Further, the previous snapshot-based PoR totaled around $69 Billion(Nov 11th 2022). This means their audit only "proved" reserves for 14% of their total assets.

Now clearly, this is highly misleading to customers who only read a 101% overcollateralization and "fully backed". Incidentally, Mazars(and Armanino) have left the crypto space 'due to concerns of how the audits are understood by the public', which is exactly my point. Virtually, no one reads the entire report to know which assets are actually in-scope of the report and compare that value to the total assets. Most of the time, the total actual token amounts in the reserves report as well as the total value of assets held by the exchange are not public knowledge and are extremely hard to accurately calculate anyway so this is almost never a viable route.

Again, I am not saying Binance was the sole reason, as there are other exchange whose PoR attentations have very low asset ratios, but Binance is definitely among the lowest. And for a player as massive as Binance and their potential industry impact, that was simply too huge a reputation risk for audit firms to take.

Sources:

https://www.binance.com/en/support/announcement/binance-releases-proof-of-reserves-system-0c7a786cbe8c4e108f3301385ab61e39

https://www.binance.com/en-IN/feed/post/53973