Common audit issues with SMSFs having crypto-currencies

SIS Act does not have any restrictions on cypto-currency investment. However the permanent documents needs to be reviewed before making such investment:

• Does the SMSF trust allows such investment?
• Does the investment strategy allow such investment?
• Is there any risk management statement to state how trustee understands cypto-currency investment and how to control the investment risks?

Some cypto-currency account providers do not allow to purchase or store crypto-currencies in the name of the SMSF.

If the wallet is in the name of the SMSF member, then there will some audit issues as below:

• Trustees must maintain separation of assets from personal assets at all times
• The ownership of the crypto-currencies can not be verified
• The money invested in the crypto-currencies may be is a loan to the SMSF and becomes in-house asset

Please note engraving of a code in a piece of metal and placing in vault will not be sufficient to verify the ownership of the crypto-currencies. 

Even the wallet can be set up in the name of the SMSF, the following issues also need to examined:

• Valuation at year end. The volatility of the crypto-currencies may make it difficult to verify the valuation and auditor may use the average value per coin.
• The controls for the using of the wallet. Auditors may need the client to authorise to view the wallet information to collect the audit evidence.