Blockchain Audit (FAQ)

A blockchain audit, in the context of statutory financial reporting, is an independent audit of a company's financial statements where the business operates within the blockchain or digital asset sector. The audit is performed in accordance with International Standards on Auditing (ISA) and considers the unique accounting, governance and technology risks associated with blockchain businesses.

A Crypto-Asset Service Provider (CASP) is an entity authorised to provide one or more regulated crypto-asset services under the EU Markets in Crypto-Assets Regulation (MiCA), such as custody, exchange, trading platform operation, portfolio management or crypto-asset transfer services.

MiCA itself establishes regulatory requirements for authorised CASPs. Whether a company requires a statutory audit depends on the applicable legal and financial reporting requirements, including Cyprus company law and other relevant legislation.

Blockchain businesses involve specialised accounting, technology and governance considerations that differ significantly from traditional industries. An auditor familiar with digital assets can better understand your business model, identify relevant risks and perform an efficient, risk-focused statutory audit.

Financial statements are generally prepared using the applicable financial reporting framework adopted by the entity, such as IFRS Accounting Standards. There is currently no standalone IFRS Accounting Standard dedicated exclusively to crypto-assets.

The valuation methodology depends on the characteristics of the asset, the applicable accounting framework and management's accounting policies. Auditors evaluate whether the chosen methodology is appropriate and consistently applied.

This depends on the contractual arrangements, the rights and obligations of the parties and the applicable accounting framework. Assets held on behalf of customers are not necessarily accounted for in the same manner as company-owned assets.

Potentially. The accounting treatment depends on the legal and economic characteristics of the particular stablecoin and the entity's purpose for holding or issuing it.

Auditors obtain evidence from a combination of sources, which may include blockchain records, accounting records, contracts, custody confirmations, reconciliations and management documentation. The procedures performed depend on the circumstances of each engagement.

Public blockchain transactions can often be observed using blockchain explorers and other tools. However, blockchain records are only one source of audit evidence and do not, on their own, establish legal ownership or appropriate financial statement presentation.

No. Auditors do not require possession of private keys. Audit procedures are designed to obtain sufficient appropriate evidence without compromising the security of digital assets.

A statutory financial statement audit is not a smart contract audit. However, auditors may seek to understand how smart contracts affect financial reporting where relevant to the financial statements.

Appropriate governance depends on the size and complexity of the organisation but generally includes effective board oversight, documented policies, segregation of duties, internal controls, risk management and reliable financial reporting processes.

Yes. Every organisation should establish internal controls proportionate to its size and operational risks. Good governance supports accurate financial reporting and facilitates the statutory audit.

Wallet reconciliations help ensure that blockchain balances agree with accounting records, enabling management to identify discrepancies promptly and prepare reliable financial statements.

Typical documentation includes:

• accounting records;
• board minutes;
• wallet registers;
• contracts;
• reconciliation schedules;
• accounting policies;
• custody agreements;
• exchange statements; and
• supporting documentation for significant transactions.

No. A statutory audit focuses on the financial statements. Auditors obtain an understanding of technology controls relevant to financial reporting but do not provide an opinion on the effectiveness of an organisation's cybersecurity programme.

Auditors consider information systems relevant to financial reporting. The extent of this work depends on the nature of the organisation and the assessed audit risks.

No. Although blockchain technology provides transparency, fraud may still occur through unauthorised access, manipulation of accounting records, management override of controls or other means.

The accounting treatment depends on the facts and circumstances of the arrangement, including the contractual rights, the applicable accounting framework and management's accounting policies.

Some CASPs provide services as principals, while others act as intermediaries. Determining the correct presentation of revenue requires careful analysis of the contractual arrangements and the applicable accounting requirements.

Proof of Reserves is generally a process intended to demonstrate the existence of certain crypto-assets at a point in time. It is not equivalent to a statutory financial statement audit.

No. Proof of Reserves and statutory audits have different objectives. A statutory audit considers the financial statements as a whole, including assets, liabilities, revenue, disclosures, governance and accounting policies.

Organisations benefit from engaging with an auditor well before the financial year-end, particularly where the business has complex digital asset activities or is preparing for its first statutory audit.

Good preparation includes maintaining complete accounting records, performing regular reconciliations, documenting accounting policies, organising supporting documentation and establishing appropriate internal controls.

Careful planning, organised documentation and regular communication with the audit team help minimise disruption during the engagement.

The duration depends on factors such as the size of the organisation, the complexity of its operations, the quality of accounting records and the timeliness of management's responses.

Where significant deficiencies relevant to the audit are identified, auditors communicate these to management or those charged with governance in accordance with professional standards. Addressing such observations can strengthen governance and improve financial reporting.

Our team combines expertise in:

• International Standards on Auditing (ISA);
• IFRS Accounting Standards;
• blockchain technology;
• digital asset accounting;
• corporate governance;
• financial reporting;
• internal controls; and
• Crypto-Asset Service Providers operating under the MiCA framework.

We understand the challenges facing digital asset businesses and provide independent statutory audits tailored to the risks associated with blockchain operations.

Where consistent with our independence obligations, we assist clients in understanding financial reporting requirements, preparing for the statutory audit and strengthening governance arrangements.

Yes. Subject to applicable legal, professional and independence requirements, we support organisations with cross-border operations and international digital asset activities.