Ways A Crypto Investment Company Audit Will Differ From Traditional Financial Company Audit

Once in a while, crypto investment companies and financial companies alike get audited to ensure there are no settlement errors.

By examining the company’s book, an auditor can provide reasonable assurance that the company is legitimate. This ensures investors’ money is protected from adverse effects that can affect the company.

Hence, you should not see auditing as a totally bad thing for any business. Auditing may affect you if the company is not operating legitimately. In such a case, the audit may lead to fines and sanctions that can cause the company to close down. Below, we elaborate on some of the differences between auditing a crypto investment company and a financial company.

Who can audit the company?

One of the first major differences between auditing crypto investment companies and financial companies is who can audit the company. As for crypto investment companies, anyone can audit the company. This is because of the nature of their crypto being transparent. Moreover, auditing crypto companies is way easier than you can imagine. Oftentimes, they don’t need auditing because every transaction information is made public already. However, when it comes to financial companies, not anyone can walk up to them and request to audit them. Except you are a member of the financial company or a certified public accountant (CPA) you can’t audit it.

Type of data they can examine and inspect

Another aspect worth taking note of when it comes to auditing is the type of data to be audited. During an audit, the auditor’s lookout for cash flow, financial assets, derivatives, and intangibles, amongst other valuable data that can give them an insight into the company’s financial situation. When it comes to crypto companies, an auditor’s main focus is on inspection data on the Blockchain. Whereas when it comes to auditing a financial institution, data like income statements, cash flow statements, and balance sheets are used.

Transaction disclosure

Most crypto companies are decentralized and have a public ledger. What this means is that all their transaction history is stored in a public space where anyone can monitor it. So, when auditing crypto investment companies, no transaction history can be hidden. For this reason, the auditor can search for any specific transaction that may seem suspicious. Whereas if it were a financial company, transaction disclosure is often a debate. Financial companies are more concerned about giving their clients the confidence that their data will be kept private. As such, unless they have to, most financial companies will not disclose much data about their clients.

Effect on the company

Another thing about auditing in any industry is that it always hurts the reputation of the company. People often believe that anytime any company is being audited, it is because of some fraud or a criminal act they committed. The effects of auditing a company are often more serious in some industries than in others. The effects of auditing a crypto investment company are more serious than financial companies. This is because investors in crypto can easily liquidate their assets when they hear rumors of an audit.

Cost of the audit

When it comes to comparing the difference between auditing a crypto company and a financial company, the cost to audit them comes to mind. This is because auditing generally is known to be a very expensive process, but worth every penny with time. When you compare the cost of auditing a crypto investment company, it is cheaper than a financial company. This is because the records that often need to be audited in a crypto investment company are often public. So the auditor simply goes to the public Blockchain and inspects whatever is needed. However, for a financial company, the auditor has to first settle every legal cost, before considering the cost of the actual audit. At the end of the day, the total amount will add up to a large amount.

The time it takes to audit

One last thing that differentiates how crypto companies are being audited from how financial companies are being audited is the amount of time it takes to audit them. Financial companies take a considerably longer time to audit than crypto companies. This is often due to the complex nature of financial institution record-keeping, which is why they take so long to complete. Sometimes it may take weeks or months to audit a financial company. Whereas, auditing a crypto investment company takes only a few weeks.