There is a growing demand for IT audits that review the procedures and security measures used by cryptocurrency exchanges. In this article, we'll walk you through the step-by-step process of conducting an effective IT audit of a cryptocurrency exchange, from preparation to writing the audit report.
To perform an effective IT audit, pretend you have a fictitious exchange and describe the step-by-step process.

Planning

First, you need to define a scope that encompasses all systems and processes related to storing, exchanging, and trading cryptocurrencies in your enterprise. You should conduct a detailed analysis of your cryptocurrency exchange's business model, organizational structure, and regulatory environment to identify key risks related to your systems and processes and build audit procedures to address them.

For example, one of the risks identified might be the possibility of unauthorized access to user accounts and cryptocurrency theft. To address this risk, audit procedures may include assessing the effectiveness of the organization's user authentication process and implementation of multi-factor authentication for users who hold cryptocurrency.


Preliminary review

A preliminary assessment of the cryptocurrency exchange's IT environment should be performed to uncover any weaknesses or issues that require further investigation. This should include a review of the exchange's policies, procedures, and controls related to the storage, walleting, transfer, and trading of cryptocurrency.
Auditors should also review the exchange's disaster recovery and business continuity plans to ensure their comprehensiveness and adequacy. A risk assessment is also required to identify areas within the IT environment that may be more vulnerable to fraud, error, or system breaches.

For example, auditors should review the measures in place to ensure that the organization's hot wallets (online wallets used for instant transactions) are secure and have appropriate access controls. They should also evaluate cold storage (offline storage) procedures to protect the majority of users' cryptocurrency.
 

Testing

Once the initial review is complete, the auditor should conduct an assessment of the organization's IT environment. To assess access controls, change management, and the recording and monitoring of system activity, the auditor should examine the exchange's controls over the storage, transmission, and trading of cryptocurrency.

Auditors should also thoroughly analyze the exchange's system architecture and IT infrastructure, including hardware and software, to identify potential flaws and ensure that the exchange stores data securely and transmits it through secure channels.

For example, auditors can test access controls by attempting to access restricted areas of the exchange's systems using different user roles. They can also assess change management by reviewing the process for implementing and documenting updates to the organization's software and IT infrastructure.

Reporting 

An exhaustive audit report should be used to summarize the audit's findings and include a complete overview of the company's IT environment as well as a list of any vulnerabilities or other problems that were discovered.

The auditor shall offer recommendations for enhancing the IT environment of the exchange, as well as for enhancing the procedures, practices, and safeguards relating to the transmission, storage, and trading of cryptocurrencies.

The report might, for instance, draw attention to a lax password policy that left user accounts open to unauthorized access. Additionally, the auditor should recommend ways to strengthen Cryptotrade's IT infrastructure, such as by implementing multi-factor authentication, tighter password restrictions, and extra security safeguards for both hot and cold wallets.

Conclusion.

Conducting a successful IT audit of a cryptocurrency exchange requires a deep understanding of the exchange's IT environment and business activities. In particular, when auditing an exchange, you will need to determine whether items related to cryptocurrencies should also be included in the audit, in which case you will need to develop a comprehensive audit plan to review all aspects of the IT environment, including wallet custody compliance, risk assessment, and testing procedures. The final audit report should present a clear and concise overview of the exchange's IT environment, highlighting any weaknesses or issues found and providing recommendations for improvement.