How Auditors Handle Cryptocurrency Holdings
Cryptocurrency is no longer just a speculative investment — companies are now holding digital assets like Bitcoin and Ethereum on their balance sheets. But with this comes a key question: how do auditors verify and audit cryptocurrency holdings?
Auditing crypto presents unique challenges, from valuation volatility to proof of ownership. This guide explains how auditors in Singapore and globally handle digital assets during financial audits.
1. Proving Ownership of Crypto Assets
Unlike traditional bank accounts, cryptocurrency does not come with a statement from a financial institution. Auditors rely on several methods to verify ownership, including:
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Wallet verification: Asking clients to sign a test transaction from their wallet to prove control.
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Third-party confirmations: Using reports from reputable crypto exchanges or custodians.
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Blockchain analysis: Checking transactions on the blockchain to confirm balances.
2. Valuing Cryptocurrency at Fair Value
Cryptocurrency prices can fluctuate dramatically, even within a single day. Auditors assess:
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Market prices at reporting date (using reliable exchanges as reference).
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Whether fair value is consistently applied across all holdings.
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Disclosure requirements for volatility risk in the financial statements.
3. Assessing Custody and Security
Auditors must evaluate how the company stores its digital assets:
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Self-custody (private wallets, hardware wallets) – risk of loss or theft if not managed securely.
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Third-party custody (crypto custodians, exchanges) – requires independent confirmation and assessment of the custodian’s reliability.
4. Reviewing Internal Controls
Because crypto is highly susceptible to fraud and theft, auditors place extra emphasis on internal controls:
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Segregation of duties (e.g., no single person should have full control of private keys).
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Access controls and multi-signature wallets.
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Policies for recording, monitoring, and approving crypto transactions.
5. Evaluating Accounting Treatment
Under accounting standards, most cryptocurrencies are treated as intangible assets or inventory (if held for trading). Auditors review:
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Whether the company applied the correct classification.
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If impairment testing has been performed (for assets held long-term).
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Whether disclosures align with Singapore Financial Reporting Standards (SFRS).
6. Tax and Regulatory Considerations
Auditors also consider how crypto holdings affect compliance:
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Reporting obligations to IRAS for trading or income from crypto.
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GST exemptions on digital payment tokens.
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MAS guidelines on digital assets, especially for regulated entities.
Final Thoughts
Auditing cryptocurrency holdings requires a combination of traditional audit skills 和 specialised knowledge of blockchain technology. From proving ownership to testing internal controls, auditors must ensure that crypto assets are properly recorded, valued, and safeguarded.
For companies, the key is transparency: keeping clear records, using secure custody solutions, and applying consistent accounting policies. This not only smooths the audit process but also builds trust with investors and regulators.
Looking for professional guidance on crypto accounting and audit readiness?
The team at USAFE can help you navigate compliance, reporting, and assurance for cryptocurrency in Singapore.
Disclaimer: This article is for informational purposes only and does not constitute any professional advice. Feel free to contact us to consult with our professional advisors team for personalized advice and guidance.
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