The Next Generation of Digital Assets: What are they and how can they be audited?

Globally, there is an expanding endorsement of digital assets by users. Subsequently, there is a notable emerging growth in investment and financial statement auditing guidelines that have also evolved, respectively. Essentially, it is advisable for corporations to avail expert consultation from Audit Firms in Dubai to outset formal auditing procedures and to seamlessly combat the intricacies of managing digital assets

What are Digital Assets? 

A digital asset is anything invented and stored digitally with proven value, ownership, and identification. This encompasses documents, data, manuscripts, photos and cryptocurrencies, to mention a few. Vitally, digital assets have immense potential to add value to professional, personal, and business conduct.

 How to Audit Next-generation digital assets in the UAE?

Digital assets are increasingly becoming popular in financial statements, due to their renowned stability and promising future. Subsequent to this, it is essential to outset formal auditing procedures through approved Audit Firms in Dubai.

Digital assets could be cash or financial instruments; the primary distinguishing yardsticks are explained beneath:   

• Management’s responsibilities
• Auditors’ responsibilities
• Role of Regulatory Authorities and Standards

Responsibilities of the management

In order to effectively manage digital assets, businesses need to know where to put them and how to categorize them, regardless of not having a physical presence, (such as cryptocurrencies). The term ‘cash’ or ‘financial instrument’ describes these two types of investments, respectively. 

Financial Assets: Typically, financial assets are described in terms of cash or equity instruments. An entity has a contractual right to receive cash or other financial assets from another entity. The entity’s equity financial statements may reflect a specific agreement to exchange financial liabilities with another entity under specific terms and conditions.

Cash: Presentation, cash serves as a medium of exchange and economic unit for the purchase of things and services in a way that allows all transactions to be measured. As a result, audits are conducted using traditional methods by collecting all the data through top internal and external audit firms in the UAE. 

Responsibilities of auditing firms in Dubai

Corresponding to management responsibilities in auditing, auditors have some specified methodologies to conduct financial statement audits.

• A blockchain protocol is used to audit digital assets in a well-organized manner.
• Have a proper understanding of financial asset audits by researching their protocols thoroughly.
• Continual monitoring of differences between assessments and risks
• Identification of diverse and complex risk factors for different digital assets.

Also read: What are the audit procedures to verify the fixed assets in Dubai

The scope of audit firms

The American Institute of Certified Public Accountants and the Center for Audit Quality, are actively working on the achievement of consistent approaches for auditing emerging technologies such as digital assets. In terms of how transactions are processed, recorded, initiated, and reported, blockchain plays a significant role. Several of its unique characteristics can help auditors to perform audits more effectively. Audit firms in Dubai consider these blockchain protocols a priority in their auditing and comprehensive assessment processes. Due to the blockchain’s complete summary of transactions, this process is more efficient and cost-effective. The exact time of transactions makes audits possible at any time, helping regulators to audit digital assets effectively.

Further, top auditors are much aware of probable complexities that can affect a digital asset’s risk. Digital assets are designed in such a way that they conceal the identity of the account holder behind an alphanumeric code, also known as the private key. This makes it difficult for one to determine the real owner behind a particular transaction. As a result, clients may not show all keys they possess or share them with other companies. Auditors ought to verify whether transactions started manually, or went through an automatic system using a smart contract, to deal with diverse and complex risks associated with automatic transactions.

Auditors look into software flaws and other hacking schemes that can affect manual transactions. In digital audits, auditors have to consider the possibility of not providing correct information from third-party data feed services. Overall, auditors can face issues in just proving the existence of digital assets.

Also read: Audit Firms in Dubai presentation of contract assets as per IFRS 9

Role of regulatory authorities and standards

Governments play a pivotal role in enabling auditors through the enforcement of regulations and standards that protects the conduct of auditing digital assets. This provides firm security to investors and businesses.

 Digital asset auditing through top audit firms in Dubai 

With the fast-growing expansion of digital assets endorsement by users, it is highly essential to avail expert services of Audit Firms in Dubai to seamlessly combat the complexities of managing digital assets. So, contact us today and we shall be happy to assist you.