Systemizing the Challenges of Auditing Blockchain-Based Assets
41 Pages Posted: 2 May 2019 Last revised: 5 May 2020
Date Written: March 4, 2020
Presently, auditing firms are hesitant to accept mandates from companies that hold a significant amount of cryptoassets primarily because the blockchain market introduces novel, technically sophisticated, and risky propositions that auditors are unequipped to handle. Abrupt recusals by auditors operating in this sector have led to several enterprises being placed on cease trade by securities regulators for failure to produce audited financial statements on time, thus impeding these companies from raising capital and bringing new investment to fund innovation in this space. This hesitation represents a departure from the trend towards the auditing profession’s ongoing expansion into new audit spaces. Through an iterative process of interviews with senior accounting professionals, structured brainstorming amongst a multidisciplinary team of accountants and blockchain experts, and a focus group with experienced auditors, we critically analyze the purported roadblocks to auditing blockchain firms and map them to traditional auditing practices. We urge auditors to reconsider their resistance to the blockchain sector by demonstrating that providing an audit opinion is challenging but not insurmountable. We argue that, like other sectors where auditors provide a structuring presence by offering confidence to market participants, auditors should collaborate with subject matter experts in order to provide assurance to this sector. Rather than undermining the auditor’s work due to their lack of knowledge, auditors essential service of offering trust necessary service of structuring impact on this sector role to attract new investment to the sector.
Keywords: Blockchain, Financial Audit, Cryptoassets, Accounting Firms, Auditors, Cryptocurrencies
Suggested Citation: Suggested Citation