Top professional services firms, including EY, PwC, and KPMG, are currently hiring hundreds of blockchain and cryptocurrency experts to offer auditing services to companies involved in the loosely regulated sector, the Financial Times reported on Oct. 29.
Auditors Grapple with Crypto and Blockchain
Despite a prevailing lack of consensus on how digital assets should be accounted for and the overall negative sentiment large financial institutions have towards cryptocurrencies in general, major accountancy firms don’t shy away from providing services to companies in the sector.
Companies such as EY, PwC, and KPMG are ramping up their by hiring specialized staff and developing their own in-house technologies to support the crypto audit process. The main reasoning behind the overwhelming support the industry has gotten from the auditors stems from their belief that businesses will continue to use the blockchain technology underpinning it even as the hype around cryptocurrencies dies down.
Jeanne Boillet, global assurance innovation leader at EY, told the Financial Times that the company previously had more than 150 clients worldwide involved in crypto assets as of September 2018 and that the company did not have any choice but to address it as many of their clients have invested in cryptocurrencies.
EY’s rival RwC currently employs around 400 blockchain experts globally across multiple divisions within the company, including its consultancy business. Ralph Weinberger, leader of PwC’s global network assurance methodology group, said that the company is providing “significant resources” to providing auditing services in both cryptocurrency and blockchain.
A Promising Industry That Still Requires a Lot of Work
And while the potential auditors see in blockchain and crypto is huge, the lack of regulation around the industry is certainly making things harder. There is currently no clear guidance for how the assets should be accounted for or audited, as they do not fall neatly under current standards, forcing companies to draw up their own processes.
David Lyford-Smith, technical manager at the Institute of Chartered Accountants in England and Wales, said that most auditors viewed cryptocurrencies as intangible assets, though in some cases they were being treated as inventory.
However, the main problem auditors are faced isn’t the lack of support from government regulators or appraising the value of cryptocurrencies, but verifying ownership. Jatin Patel, a director in the investment management and funds audit practice at KPMG, told the Financial Times that the company struggles with the anonymity afforded to holders of most digital currencies.
But Mr. Patel added that proof of ownership was becoming easier as crypto custodians become more prevalent. Other companies, such as EY, are addressing this issue by carrying out due diligence on potential crypto clients, sometimes going beyond their standard procedures.
Ms. Boillet of EY said:
“We are pushing and challenging companies in this industry so that [their] controls are proper and secure.”
Cover Photo by Alan Gibworth on Unsplash