Crypto audits and proof of reserves reports are on the rise as the IRS increases oversight on cryptocurrency transactions. The lack of clear, universal guidelines, however, make it challenging for crypto companies to accurately value and report their crypto assets, adding to the complexity of compliance.
To prepare your business for a crypto audit, be sure that your financial records, internal controls, and documentation meet the necessary standards required by external auditors. For companies with crypto assets, this process is particularly intricate due to the volatile nature of cryptocurrencies and the evolving regulatory environment. Key Steps:
- Internal Review: Conduct an internal review of your financial statements, focusing on areas with high risk, such as crypto transactions and valuations.
- Documentation: Ensure all transactions are thoroughly documented, including dates, amounts, counterparties, and fair market values.
- Internal Controls: Establish and test internal controls related to crypto transactions, storage, and security.
To ensure comprehensive audit readiness, consider the following detailed steps:
A. Management Review and Documentation
B. Documenting Transaction Flows
C. GAAP Alignment Assessment
D. Adjustments Process
E. Drafting Technical Accounting Memorandums
F. Preparation of Financial Statements
G. Support and Facilitate the Audit Process
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