Statutory Audit of Cyprus CASPs

The introduction of the European Union's Markets in Crypto-Assets Regulation (MiCA) has established a harmonised regulatory framework for Crypto-Asset Service Providers (CASPs) across the European Union. In Cyprus, authorised CASPs operate under the supervision of the Cyprus Securities and Exchange Commission (CySEC), while continuing to comply with their obligations under Cyprus company law, applicable financial reporting standards and other relevant legislation.

For many CASPs incorporated in Cyprus, a statutory audit forms an essential part of the annual financial reporting process. Beyond meeting legal requirements, an independent audit enhances confidence among shareholders, investors, banking partners, regulators and other stakeholders by providing assurance that the financial statements have been prepared in accordance with the applicable financial reporting framework.

Our firm specialises in the statutory audit of Cyprus CASPs, combining expertise in International Standards on Auditing (ISA), International Financial Reporting Standards (IFRS) and the operational characteristics of blockchain and digital asset businesses.

Under MiCA, a Crypto-Asset Service Provider is a legal person authorised to provide one or more regulated crypto-asset services within the European Union.

These services may include:

• custody and administration of crypto-assets on behalf of clients;
• operation of a crypto-asset trading platform;
• exchange of crypto-assets for funds or other crypto-assets;
• execution of orders relating to crypto-assets;
• reception and transmission of client orders;
• placement of crypto-assets;
• portfolio management;
• transfer services for crypto-assets; and
• advice relating to crypto-assets.

While the services differ, all authorised CASPs are expected to maintain appropriate governance arrangements, reliable accounting records, effective internal controls and robust financial reporting processes.

A statutory audit is far more than a compliance exercise. It provides independent assurance over the financial statements and strengthens confidence in the integrity of an organisation's financial reporting.

For crypto-asset businesses, the audit also demonstrates that management has implemented appropriate systems to record complex digital asset transactions, safeguard client and corporate assets, and support reliable financial information.

An effective audit contributes to:

• improved corporate governance;
• enhanced investor confidence;
• greater transparency;
• stronger financial reporting processes;
• identification of control weaknesses;
• improved risk management; and
• increased credibility with banking institutions, business partners and regulators.

The responsibility for preparing financial statements rests with the directors of the company.

Directors are responsible for:

• maintaining adequate accounting records;
• preparing financial statements in accordance with the applicable financial reporting framework;
• establishing appropriate internal controls;
• safeguarding company assets;
• assessing the entity's ability to continue as a going concern; and
• providing auditors with access to relevant information and documentation.

An independent audit does not replace these responsibilities but provides assurance over the financial statements prepared by management.

Early preparation can significantly improve the efficiency of the audit process.

Management should ensure that:

• accounting records are complete and up to date;
• digital asset reconciliations have been performed;
• wallet inventories are maintained;
• supporting documentation is readily available;
• significant contracts have been organised;
• internal control procedures are documented; and
• management is available to respond to audit enquiries promptly.

A well-prepared audit reduces disruption and enables the engagement to progress more efficiently.

Although the principles of statutory auditing remain consistent across industries, crypto-asset businesses present specialised accounting, operational and technology risks.

Choosing an auditor with experience in blockchain businesses offers several advantages:

• understanding of blockchain transaction flows;
• familiarity with digital asset custody models;
• knowledge of crypto-related accounting issues;
• experience with emerging financial reporting practices;
• appreciation of technology and cybersecurity risks; and
• practical insight into governance expectations for regulated digital asset businesses.

Sector-specific expertise helps auditors focus on the areas of greatest significance while delivering an efficient and risk-focused audit.

Auditors with blockchain expertise understand the operational characteristics of crypto-asset businesses and can perform a more efficient, risk-focused audit while maintaining independence and professional scepticism.

Whether your organisation is preparing for its first statutory audit or is seeking an auditor with experience in digital assets, our team provides independent assurance services tailored to the needs of Cyprus Crypto-Asset Service Providers and other blockchain businesses.

We work closely with management and those charged with governance to deliver a high-quality audit that meets professional standards while recognising the unique characteristics of the digital asset sector.