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Hi SMSFAAA team,
I am auditing a fund that sent their crypto to BTC Cold Storage for security reasons.
However, the problem with the Cold Storage is that the trustee cannot provide any documents to show the ownership of the crypto investments, as they can only provide the extract (attached).
The investment in crypto represents about half of the fund's assets.
Can you please advise how you would deal with this situation.
Would it be sufficient if the trustee provide a statutory declaration to confirm the SMSF crypto holdings in the cold storage? Otherwise, what are the implications for the audit? Would you qualify the audit report? What would you mention in the Management Letter?
Thank you very much in advance.
Thanks Jean, for the very pertinent question.
There is a significant quandary for SMSF auditors where a fund holds its interests in crypto in "cold storage". The problem is the inability of the fund auditor to test for the existence of the fund's asset.
To be frank, if an SMSF has invested in cryptocurrency and the investment is held in “cold storage” this presents a significant problem from the perspective of the SMSF auditor.
Testing for the existence of the fund’s investment in cryptocurrency becomes impossible. Whilst appreciating the suggestions that you offer (i.e., a statutory declaration and the like) these do not prove the existence of the asset.
Accordingly, it is suggested that a qualification of the audit report is necessary given the inability to test for the existence of the fund’s asset.
It would be very interesting to hear the perspective of other fund auditors in relation to this emerging matter.