Determining the Inherent Risks of Cryptocurrency: A Survey Analysis

Abstract

Cryptocurrencies pose several risks that impact the inherent risk assessments of auditors. The SEC has issued warnings about the risks (Clayton 2017), and the PCAOB lists virtual assets as a key focus area in future inspections (Vincent and Wilkins 2020). This study examines how accounting professionals perceive the inherent risks associated with cryptocurrency based on their likelihood of occurrence and expected impact on financial statements. We find the risk of determining cryptocurrency value is perceived as having the highest likelihood of occurrence, and unauthorized private key access has the highest impact. Combining the evaluations of likelihood and impact, we rank the risk of ineffective exchange-level controls as having the highest inherent risk. We also find that inherent risk judgments are negatively correlated with cryptocurrency experience. Professionals with prior cryptocurrency experience, or who work for a company planning to process cryptocurrency transactions, rate inherent risk lower than those with less experience.

Exploring the uncharted territories: a structured literature review on cryptocurrency accounting and auditing

“…A primary emphasis in auditing cryptocurrency transactions lies in the necessity for auditors to improve their understanding and expertise in virtual currencies and the related risks (Harrast et al. , 2022), which is influenced by several contributing factors.…”

“…A primary emphasis in auditing cryptocurrency transactions lies in the necessity for auditors to improve their understanding and expertise in virtual currencies and the related risks (Harrast et al, 2022), which is influenced by several contributing factors. These factors Exploring the uncharted territories include the lack of prior experience and technical expertise on the part of the auditor, as well as deficiencies on the part of the client in terms of risk management, the preparation of accounting reports, distribution of responsibilities or the maintenance of adequate internal controls (Ozeran and Gura, 2020;Vincent and Davenport, 2022;Vincent and Wilkins, 2020).…”

Research on the Investment Value of Cryptocurrency and Blockchain Technology

“…The entity decides to use a cryptocurrency exchange, but neither the balance of cryptocurrencies held in the entity's account nor the transactions the exchange executes on the entity's behalf are effectively under the exchange's control. The participants consider the challenge of estimating a cryptocurrency's worth as the most probable cryptocurrency risk [9]. Zhang investigates the pricing of liquidity risk across a range of cryptocurrency returns.…”

importancia de las criptomonedas y su impacto en los mercados financieros internacionales a partir de la evolución del bitcoin

“…En ese sentido, el término DeFi se refi ere a la categoría de aplicaciones basadas en Blockchain, para prestar servicios fi nancieros descentralizados involucrando a una variedad de tecnologías, modelos de negocios y estructuras organizacionales; todo ello basado en los protocolos DeFi, que defi ne todas las especifi caciones de software que permiten crear, manejar y convertir activos digitales creados sobre las cadenas de bloques. Dada la existencia de volatilidad en los precios del mercado de criptomonedas, "Las criptomonedas pueden experimentar una volatilidad de precios signifi cativa debido a que la cantidad en circulación no se puede manipular rápidamente, a diferencia de un supuesto sistema monetario del banco central de bajo riesgo" (Harrast, McGilsky, y Sun, 2021).…”