Crypto
CPAB continues to identify challenges in audits of reporting issuers that operate in the crypto-asset sector.
Canadian reporting issuers in this sector are involved in a broad range of activities associated with crypto assets, including:
- Validating, in exchange for a fee, crypto-asset transactions which get recorded on blockchains.
- Holding onto crypto-assets directly or indirectly (i.e., using derivative contracts) to gain exposure to the sector.
- Acting as intermediaries for their customers by, for example, facilitating purchases and sales of crypto-assets on a crypto-asset trading platform.
- Staking of crypto-assets either as a validator or a delegator or providing liquidity to liquidity pools on decentralized finance (DeFi) platforms to earn rewards.
- Borrowing and lending of crypto-assets to earn a return.
- Creating, selling or owning non-fungible tokens (NFTs) with the potential to earn royalties.
To date, CPAB has published several inspections insights, including expectations of audit firms engaged in audits of crypto-asset reporting issuers, and considerations for audit firms where reporting issuers use custodians to safeguard assets.
These publications were in response to a need for guidance on how auditors should be considering and responding to significant risks arising from typical activities of crypto-asset reporting issuers. Although we have seen improvements to the procedures performed by auditors of reporting issuers in this industry, CPAB’s most recent Crypto asset inspections insights publication emphasizes that there is still a need for improvement as we continue to identify significant findings in many of the audits we inspect in this sector.
CPAB continues to monitor the fast-moving developments in this sector. We are an active member of CPA Canada’s Crypto-Asset Auditing Discussion group which also includes representatives from academia, audit firms, the Auditing and Assurance Standards Board and CPA Canada.