A Proposed Auditing Program for Auditing Cryptocurrencies Transactions – Analytical Study

Abstract

Cryptocurrencies are still a bit of an unknown entity when it comes to audit and assurance. What considerations do auditors need to take on board? & How we audit cryptocurrency?

A program for auditing cryptocurrency transactions has been proposed and it's important that Ernst & Young EY, one of the major Big 4 companies in auditing, published, on 01/30/2020, an article entitled, (How to audit the next generation of digital assets). and this article ended by acknowledging the emergence of a new generation of digital assets (cryptocurrencies), promising more stability. Since these cryptocurrencies frequently appear in financial statements, the question auditors have to consider is, how are these assets audited?

The Institute of Chartered Accountants in England and Wales ICAEW published on 09/12/2022 an article regarding the audit of entities that use cryptocurrencies, calling for the provision of an audit program for cryptocurrencies and it was titled “How to audit cryptocurrencies?” and mentioned that there are still significant challenges facing these entities when it comes to auditing accounting transactions for them, such as what considerations should auditors take? Cryptocurrency is still fairly new, even though it has been around for over a decade. Especially in the absence of any publications from professional organizations, as a result, it can be very difficult to audit. There is a real risk that cryptocurrencies could be overvalued or undervalued, given this lack of comprehensive guidance. This means that the audit risk is higher, which must be considered while accepting and retaining the customer and planning the audit procedures. It also means that auditors often have no choice but to apply steadfast general principles such as "prudential" and "On going concern". 

Cryptocurrencies were also mentioned in the Journal of Accountancy article, as FASB was appointed to draft a disclosure standard for cryptocurrencies on 12/16/2022, and the Financial Accounting Standards Board (FASB) made several interim board decisions regarding its project on currency disclosure. encrypted, and the Board agreed to create a draft presentation to update the relevant accounting standards. Subsequently, the Financial Accounting Standards Board determined that entities - public and private - that maintain cryptocurrency pools within the scope of the project will be required to:

FASB decided that entities — both public and private — that hold crypto-assets within the scope of the project would be required to:

• At a minimum, present the aggregate amount of crypto-assets separately from other intangible assets that are measured using other measurement bases.
• Present gains and losses on crypto-assets in net income and present those gains and losses separately from the income statement effects of other intangible assets, such as amortization or impairments.
• Classify crypto-assets received as noncash consideration during the ordinary course of business that are converted nearly immediately into cash as operating cash flows.

FASB also decided that investment companies should present their financial statements with presentation requirements in FASB ASC Topic 946, Financial Services — Investment Companies, and not-for-profit entities by the presentation requirements in Topic 958, Not-for-Profit Entities. And the board affirmed that disclosures in Topic 820, Fair Value Measurement, would be required for crypto-assets within the scope of this project. Those disclosures would be required in annual and interim periods.