A Sharper Framework for Digital Asset Audits
The AICPA has published an updated practice aid on the auditing of digital assets, including cryptocurrencies. The guidance operationalizes audit procedures across three dimensions: valuation, existence and rights, and obligations tied to digital asset holdings.
Valuation Procedures
Auditors are expected to understand the unique characteristics and risks associated with each class of digital asset. The practice aid emphasizes obtaining sufficient and appropriate evidence to support valuation assertions. Relevant considerations include:
- Market prices from reliable sources
- Market depth sufficient to support the quoted prices
- Trading volume relative to the position size being valued
- Asset transfers and related transaction data
Auditors are also directed to assess whether their clients' valuation methods align with industry practice and comply with relevant accounting principles.
Existence and Rights
Verifying that a client actually controls the digital assets reported on the balance sheet requires a distinct procedure set. The practice aid directs auditors to:
- Obtain confirmations from third-party custodians where applicable
- Review blockchain transactions to corroborate ownership
- Assess the controls and safeguards the client maintains to protect its digital asset holdings
Obligations
The guidance also addresses the obligations tied to digital asset positions — including evaluating segregation of duties, custody arrangements, and adherence to contractual agreements governing how the assets are held and used.
Implications
As institutional adoption of digital assets continues, rigorous audit standards in the space become more consequential. Firms with clients in the category should update workpaper templates, staff training, and engagement risk assessments to reflect the updated guidance.