Bitcoin and Cryptocurrency Technologies †Free Samples to Students

Question: Discuss about the Bitcoin and Cryptocurrency Technologies. Answer: Introduction Auditing is the process of inspecting the books of accounts to measure the accuracy of the financial records. In the recent age, there is a constant change in the method of transactions with the help of internet. This new technology changed the way in which people interact and perform commercial transactions (Vigna and Casey 2016). The Cryptocurrency has been evolved as a substitute of previous modes of transactions management. This technology has made it possible to perform the various international transactions with a very low operational cost, but it also imposes a series of regulation related challenges since this system is not governed by any kind of governmental agency, whereas its users are the sole responsible for its operation. Many countries have issued regulations and informations on the use of Cryptocurrencies, but these initiatives, most of the time, do not provide definitive answers regarding the technique this digital instrument should be treated and the process of reg ulating the same (Suzuki and Murai 2017). A Cryptocurrency is referred to as a virtual or digital currency that uses technique of cryptography for security. Cryptography is the art of solving the codes .In case of crypto currency it is difficult to fraud as there is a unique security feature (Bolt 2017). The anonymous nature of the crypto currency transactions helps to avoid the various fraudulent accounting activities like tax evasion and money laundering.ir has an organic nature that is it not issued by the central authority thus, immuning the transactions from government manipulation and interference. Pseudonym Satoshi Nakamoto who is referred to as an individual or a group launched the first crypto currency in 2009 named Bitcoin. By the time of September 2015, more than 14.6 million bitcoints were circulating the total market with a value of $3.4 billion since then a number of competing Cryptocurrencies evolved in the global market in the name of litecoin, namecoin and PPcoin. Benefits and drawbacks of crypto currency With the help of Cryptocurrencies, it is more easy to transfer funds between two parties in a transaction. The private and the public keys for security purposes facilitate the transfers in the process. The crypto currencies help in the reduction of processing fees and enable the users to avoid the steep bank charges and other charges by financial bodies for wire transfer. The Bitcoin contains various block of chains where it stores the online ledger of all the transactions that have been conducted through Bitcoins software (Bunjaku, Gorgieva-Trajkovska and Miteva-Kacarski 2017). There is a structure of data for the ledgers that are exposed to threat from the hackers can be easily copied across the computers running through the Bitcoin software and the threat can be easily be identified. Many experts see this block chain as having important uses in the technologies like the online voting and crowd funding. Low transaction cost is the Cryptocurrencies makes the payment process more efficient. However, the Cryptocurrencies does not have any central repository, as they are virtual. If there is no backup of the holding, a digital Cryptocurrency balance can be wiped out by a crash of the computer. As the prices are based on demand and supply, the rate of Cryptocurrency that can be exchanged for another currency can widely fluctuate. Moreover, Crypocurrencies are not immune to hacking threats. In the history of Bitcoins, consists of more than 40 threats that include more than $1 million in value. Challenges faced during Cryptocurrency auditing: The auditing refers to the financial inspections of the books of accounts to verify its accuracy. Crypotocurrencies exists virtually; they are the virtual money that is not backed by any government or the central bank (Dai and Vasarhelyi 2017). The Cryptocurencies are designed to operate in the peer to peer economy without any centralized repository or registration. There is a existence of uncertainty that is causing the Cryptocurrency startups face challenges while auditing management. As a auditor, while understanding Cryptocurrency the various challenges faced during the audit process can be jotted down as follows: Understanding the Digital currencies: The digital currency and other digital assets are the representation of digital values that are traded as a medium of exchange. Since crypto currencies and other digital assets experience high rate of risk and reduced liquidity, open- end fund and close end funds with side pockets are common in the investment funds (Decker et al. 2015). Moreover, the tokens are not easily and profitably disposable. The investment fund structure must be tailored according to the investment strategy that is not easy to inspect. Risk to attract investors: In the digital asset class, the security assets are the major concern for both investment managers and investors. The hacking news and the theft that been caused by the investors become wary of investing (Broby and Paul 2017). The losses due to hacking and theft is limited to the value of the digital assets held. Audit considerations: There are unique considerations for the digital assets, while the funds are being audited. The auditor job is to obtain the proofs of the existence of the assets and control of these assets for the third parties such as banks, brokers and private investees. Unless the digital assets are held with any exchange, it becomes time consuming and difficult to calculate. Current state regulations: The Cryptocurrencies are highly regulated by various agencies and jurisdictions, but that regulatory body does not provide enough guidance. From the legal point of view, the status of the Cryptocurrencies like the Bitcoinis not agreed, as they are not backed by any government supervision. The auditors lack in knowledge about the set of rules and policies according based on which the books shall be audited (Sapovadia 2015). Conclusion The evolution of Cryptocurrency had been evolved to ease the method of financial transactions. The cash and other financial modes of transaction as are being replaces by the digital software. Although, many countries are banning the use of the Cryptocurrencies as payment outright as there is many legal and logistical hurdles. The Cryptocurrencies are not backed up by any authorized body hence, as an auditors many challenges had been faced. The lack of regulation and uniformity pose a great challenge to the auditors and the accountants to calculate the financial accuracy. References Bolt, W., 2017. Bitcoin and Cryptocurrency Technologies: A Comprehensive Introduction. Broby, D. and Paul, G., 2017. The financial auditing of distributed ledgers, blockchain and cryptocurrencies.Journal of Financial Transformation,46. Bunjaku, F., Gorgieva-Trajkovska, O. and Miteva-Kacarski, E., 2017. Cryptocurrenciesadvantages and disadvantages.Journal of Economics,2(1). Dai, J. and Vasarhelyi, M.A., 2017. Toward Blockchain-Based Accounting and Assurance.Journal of Information Systems,31(3), pp.5-21. Decker, C., Guthrie, J., Seidel, J. and Wattenhofer, R., 2015, September. Making bitcoin exchanges transparent. InEuropean Symposium on Research in Computer Security(pp. 561-576). Springer, Cham. Sapovadia, V., 2015. Legal Issues in Cryptocurrency. InHandbook of Digital Currency(pp. 253-266). Suzuki, S. and Murai, J., 2017, July. Blockchain as an Audit-Able Communication Channel. InComputer Software and Applications Conference (COMPSAC), 2017 IEEE 41st Annual(Vol. 2, pp. 516-522). IEEE. Vigna, P. and Casey, M.J., 2016.The age of cryptocurrency: how bitcoin and the blockchain are challenging the global economic order. Macmillan.