Shouldn't we be able to look at the blockchain to determine if online exchanges are operating as fractional reserves? Why is it so difficult to do this, and why did it come as a huge surprise when Mt Gox was found to be missing so many bitcoins?
I guess that even 100% reserve exchanges would keep a significant portion of all assets in "cold wallets" to minimize the risk of hacker attacks.
These are difficult to audit, then.<p>Also, The exchange could always claim that some of their users demanded a transfer, which would explain a withdrawal from on of their audited wallet. So, without knowing the "virtual" balances of their users, wallet audits would be meaningless.