They rely on 3rd party attestations where an audit firm verifies that when eg Tether says they have $100 cash, 1 btc and 1 eth, they actually do. The issue comes when these “point-in-time attestations” are gamed by eg taking a 1-day loan the day before the statements are sent so that the cash balance qualifies.

That would never fly with a real audit. You’d perform a triple tie out and the incoming cash transaction would have to be recorded. And you never do a single day.

Probably why very few of these organizations do real audits.

The audit documents make clear they are point-in-time.

I'm sure if they could do an audit for a full year/quarter, they would. But they didn't, so they can't.

They can. Anyone that won’t should be shut down immediately.