Digital assets are being used by businesses throughout the world for a variety of commercial and investment needs. The blockchain and other developments in the digital realm have fundamentally changed how we transfer wealth between entities.
There are several potential difficulties associated with using digital assets like cryptocurrencies for business. Crypto currencies’ explosive rise has been followed by significant trust difficulties, which make it difficult to provide audit reassurance over ownership and payments.
The use of digital assets is an advancing technology that auditors will soon encounter. If a digital asset is being audited, the goal is to give the auditor the ability to judge whether the financial statements are compliant with the relevant financial reporting standards.
Audit Procedures
The use of blockchains is anticipated to significantly alter how operations are conducted, executed, regulated, documented, and reviewed. The technology has a number of beneficial features that can alter and enhance how auditors carry out audits, such as the following:
- In private networks, many users can share a ledger, making industry-level audits possible.
- Blockchain allows for virtually real-time transaction settlements, making it easy to conduct an audit whenever one is necessary.
- Blockchain offers absolute proof and a history of transactions. As a result, the auditors’ verification procedure is streamlined and more reasonably priced.
Auditor’s Responsibility
Because digital assets are still relatively new, organizations or audit teams can utilize a variety of ways to stay current on performance standards. When conducting an audit of digital assets as opposed to a conventional audit, an auditor’s responsibility to acquire evidence will be very different.
- Take notice of the blockchain technology for the auditing of digital assets.
- Become familiar with the underlying standards for digital assets.
- Track the intricacies involved in defining and evaluating risks.
- Determine the variety of hazards for various digital assets
Role of Management
Management may struggle to maintain the accounts and safeguard assets owing to the difficulty of digital assets. An audit could not be performed even if the auditor possesses the necessary skills if management does not tackle operational weaknesses.
Management must recognize the risks related to digital assets, take steps to mitigate them, and put internal controls in place to compensate for them. Maintaining books and records is crucial, and management should follow up with the speed of change occurring in the industry.
- Make clear the asset category that digital assets will fall under
- Consider digital assets as non-physical, intangible assets
- Declare digital assets to be intangible and use cost as a criterion
- Tracking the flow of digital assets and determining their true value
Also due to their fictitious character, digital assets, in particular, create chances for illicit activities. The ease of access to digital assets also opens the market to individuals who lack credibility. The technology’s vagueness may also act as a barrier to good compliance and reliability. Auditors must consider the difficulties presented by digital assets while assessing clients.
Role of Regulatory Authorities & Standards
- Remarkable contributions to the use of auditing techniques for digital audits
- In the absence of defined regulatory rules for digital assets, lay the basis for conclusions about such assets.
A company may keep up to date and change with the times by closely monitoring the technology, laws, and financial reporting standards that have an impact on its existing and prospective clientele.
Bottom Line
Organizations must implement block chain technology, digital assets, and comprehend the governance and regulatory concerns that come with using the technology as it is constantly evolving. It’s high time for businesses to innovate an auditing process and supporting technology with the sole purpose of offering assurance services to organizations doing transactions with cryptocurrencies
Digital asset environments present obstacles for auditing that must be overcome by all industry participants, not just auditors. A thorough audit of digital assets is entirely possible with the correct strategy, equipment and systematic methodology.