Determining the Inherent Risks of Cryptocurrency: A Survey Analysis

Current Issues in Auditing

14 Pages Posted: 3 May 2022

See all articles by Steven Harrast

Steven Harrast

Central Michigan University - School of Accounting

Yan (Tricia) Sun

Central Michigan University - School of Accounting

Debra McGilsky

Central Michigan University - School of Accounting

Date Written: June 10, 2021

Abstract

Cryptocurrencies pose several risks that impact the inherent risk assessments of auditors. The SEC has issued warnings about the risks (Clayton 2017), and the PCAOB lists virtual assets as a key focus area in future inspections (Vincent and Wilkins 2020). This study examines how accounting professionals perceive the inherent risks associated with cryptocurrency based on their likelihood of occurrence and expected impact on financial statements. We find the risk of determining cryptocurrency value is perceived as having the highest likelihood of occurrence, and unauthorized private key access has the highest impact. Combining the evaluations of likelihood and impact, we rank the risk of ineffective exchange-level controls as having the highest inherent risk. We also find that inherent risk judgments are negatively correlated with cryptocurrency experience. Professionals with prior cryptocurrency experience, or who work for a company planning to process cryptocurrency transactions, rate inherent risk lower than those with less experience.

Keywords: Blockchain, cryptocurrency, inherent risk, virtual assets

Suggested Citation

Harrast, Steven and Sun, Yan (Tricia) and McGilsky, Debra, Determining the Inherent Risks of Cryptocurrency: A Survey Analysis (June 10, 2021). Current Issues in Auditing, Available at SSRN: https://ssrn.com/abstract=3880583

Steven Harrast

Central Michigan University - School of Accounting ( email )

Mt. Pleasant, MI
United States

Yan (Tricia) Sun (Contact Author)

Central Michigan University - School of Accounting ( email )

Mt. Pleasant, MI
United States

Debra McGilsky

Central Michigan University - School of Accounting ( email )

Mt. Pleasant, MI
United States

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