Blockchain technology represents the most important innovation since the advent of the Internet. More specifically, the blockchain technology underlying cryptosystems such as Bitcoin is significantly transforming the landscape of financial transactions. Transactions are automatically created and recorded, and the auditors who process them have access to an immense amount of information. But beyond the benefits, it is the auditing profession itself that is profoundly impacted by these technological advances.
Here are three ways that blockchain technology is changing the CPA profession:
1. A traditional audit is not appropriate for cryptocurrency assets and transactions
According to the Canadian Public Accountability Board, there are five deficiencies in audit files involving cryptocurrencies that impact a professional audit:
- Insufficient knowledge of the risks associated with cryptocurrencies, in particular the technology risks;
- Unreliability of information from crypto-exchanges;
- Insufficient evidence of ownership of cryptocurrency assets;
- Insufficient evaluation of information obtained from blockchains;
- Limited audit work regarding crypto-assets received or earned (crypto-asset mining).
In fact, the risk of inaccurate transaction information and cryptocurrency values on blockchain systems represents the greatest challenge for chartered professional accountants, who will have to change their audit strategy accordingly.
It is therefore important for new generations of CPAs, and even for the most experienced ones, to become knowledgeable about the fundamentals of cryptocurrency in order to remain their clients’ trusted business advisor.
2. The challenge of three-entry accounting systems
Companies that record crypto-asset transactions may have tools to manage these operations, which can create the challenge of a third entry. For assurance providers, it’s important to verify the integrity of the transactions, hence the need for a shared registry.
Organizations can maintain their double-entry accounting systems, while using applications protected by a blockchain for an integrated triple-entry accounting system.
Gaining a solid understanding of accounting systems and being able to verify the reliability of their data will be one of the main challenges for CPAs.
3. Lack of rules governing crypto-asset accounting (IFRS and ASPE)
There is currently no accepted framework for the classification of cryptographic assets, which results in a range of non-existent parameters being developed. There is no general description of a cryptographic asset. IFRS do not provide guidance on accounting for cryptographic assets available and there are no generally accepted standards, which means that assets may fall under several different standards. CPAs will have to navigate through the grey areas, whereas the accounting profession is traditionally very highly regulated.
In the coming years, auditors will have to keep abreast of blockchain developments. Without necessarily becoming experts, they will need to understand how this technology will change their role and strategy to audit data integrity.
As an auditor, you can now benefit from training specifically adapted to your profession, given online and which can be taken at your own pace. At the end of this program, you will certainly be able to discuss new opportunities with clients using cryptocurrencies. Contact us today!
*In connection with the Programme actions concertées pour le maintien en emploi, you could benefit from a total or partial refund for employee training during this transition period. The program ends on September 30, 2020 or when the government’s $100 million budget has been depleted. For more details, please contact us.
