With the growing proliferation of crypto and blockchain into more fields, tax compliance and auditing has become a big issue. There are some fundamental challenges when it comes to accounting and auditing crypto assets. First and foremost, volatility. The value of crypto keeps changing so drastically that it is a nightmare for many accountants. The second is regulatory compliance. Most countries have yet to come up with a strong framework as to how to deal with crypto. This makes tax filing a nightmare, and verifying crypto assets need a lot of technical knowledge which most accountants lack. With mounting pressure on crypto from governments all around the world, accounting and auditing will be a huge challenge. It might seem overwhelming for the accountants involved in crypto but one doesn’t need to learn blockchain to do an audit. Here are a few tips on how to keep up with the changing landscape.
Keeping yourself informed
The regulatory landscape keeps changing, especially nowadays more than ever. This means that as accountants one should be vigilant. Law, tax and regulations keeps changing from one quarter to the next, and if international customers are involved things get a little complicated. But unlike a few years back there are dedicated websites that are following every movement happening within the industry. Also, get into a professional society that specifically focuses on crypto. This will not only help one to keep informed, as this kind of engagement helps to build connections and friendships that can be helpful when you face uncharted waters.
Like learning any skill, learning to deal with crypto also means discipline. After all, all the knowledge that has been acquired from following news and getting to events is of no use if it can’t be used properly. Developing a good workflow will make dealing with crypto really smooth. This will initially take a lot of time but will pay off later. This is especially important as crypto accounting can quickly turn into a messy web of complex information if you don’t get organized. This is why investing time in smarter ways to organize and monitor the information involving crypto transaction is of utmost importance.
Automation has already revolutionised the accounting industry, Accountants, bookkeepers and finance professionals can no longer manually input information for every transaction and account. This is because of newer technologies as well as the nature of the globalised world which moves really fast. The same is true in the case of crypto. Only problem is when it comes to crypto its faster than traditional finances. This really forces professionals to rely on automation much more. Another added advantage of using automation is that it reduces the error rate. Let’s look at one such tool recently released by PwC (PricewaterhouseCoopers).
Halo is a data auditing suite provided by PwC to its clients. On June 19th, the firm announced an unexpected addition to the software. A set of tools that can be used to provide services that the firm calls assurance services for entities engaging in cryptocurrency transactions. The new set of tools has two new features.
– Provide independent, substantive evidence of the “private key and public address pairing” which is one of the pieces needed to establish ownership of cryptocurrency.
– Securely interrogate the blockchain to independently and reliably gather corroborating information about blockchain transactions and balances.
The new tools will help them to implement the processes and controls they will require in order to obtain assurance reports from their auditors. PwC can currently use this tool to provide assurance services to clients transacting in Bitcoin, Bitcoin Cash, Bitcoin Gold, Bitcoin Diamond, LiteCoin, Ethereum, ERC20 – OAX token, and Ripple (XRP).
As we have seen, traditional methods of accounting needs to be updated to accommodate changes in crypto. Also, new tools need to be developed for automating auditing. For a new technology like crypto this could be challenging as investors might hesitate to enter the market without adequate accounting solution. This could lead to serious fine and legal trouble for them, but this also represents a huge opportunity. Those with the skills and innovation to make such tools and softwares can reap huge profits especially at the rate the industry is growing, the market for crypto auditing and accounting software will keep increasing.
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