What is an exchange audit report?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 6 min
In short
An audit report sets out what an independent party found when it examined an exchange's financial statements or asset holdings under a defined procedure. It is better than no information, but its scope and timing are limited, and it guarantees neither future safety nor full asset backing.
Key points
- An independent party's findings under a defined procedure
- Scope and as-of date are both limited
- Different engagement types give different levels of assurance
- Not a guarantee of future safety or full backing
Definition
A report in which an accounting firm or similar third party records its findings, and the assumptions behind them, after examining an exchange's financial statements or its holdings of customer assets under a defined standard.
Several kinds of report exist: an audit of full financial statements, agreed-upon procedures limited to specific items, or an attestation about asset holdings. Despite similar names, how much responsibility the third party takes for its conclusion varies greatly. The scope and assumptions are always stated up front.
Three things are worth checking: what was examined, as of when, and against which standard. The as-of date matters most, because a report only tells you how things stood on that day. Assets and liabilities both move afterwards.
Confirming that assets exist is also different from knowing what obligations they stand against. Without the liability side, you cannot tell whether the backing is sufficient. Whether the report covers both sides is a key thing to read for.
So an audit report is useful input, but its existence is not a basis for concluding that an operator is safe. The proper use is to read what the report actually says and how far it goes, not merely to note that one exists.
Watch out for
- · An audit or attestation does not guarantee full backing or future safety
- · Changes after the as-of date are outside the report
- · Different engagement types carry different levels of responsibility