Clampdown on crypto companies creates a shortage of auditors and opens up a new market niche

Mart Nõmper,
Märt-Martin Arengu,
Margus Tammeraja,
Gregor Alaküla
Grant Thornton Baltic saade Kasvukursil Äripäeva raadios

The audit requirement recently applied to crypto companies will notably increase the workload of auditors who are expected to provide a service that is largely lacking in Estonia.

As of 15 June, the 300 companies operating under a crypto licence in Estonia must engage an auditor. “This means 300 new customers for us. This will obviously lead to a small market failure, because auditors are receiving significantly more inquiries than usual and this is a problem,” said Mart Nõmper, partner and head of audit and assurance services at Grant Thornton Baltic, on the Äripäev radio show On a Growth Trajectory.

Nõmper added that auditing crypto companies requires significant specialist knowledge and when there is no time to adjust, problems arise. “Auditors are conservative people and must ensure that they have the necessary competencies and knowledge before taking on new cases,” Nõmper explained. “The crypto company auditing service is not currently provided in Estonia. However, the involvement of an expert from abroad is very expensive and Estonian virtual service providers are not willing to pay for it.” Nõmper also noted that demand has risen in Estonia, but there is currently no supply.

Specific skills are required

The lack of supply is due to both the sudden audit requirement for virtual currency service providers and the lack of specific skills. Märt-Martin Arengu, head of the Estonian Auditors’ Association, said that in many ways auditors have to deal with blockchain technology itself – they need to audit where the data is entered, where the customer data is stored and whether all transactions are recorded. These are specialist skills that are not normally required of an auditor.

According to Arengu, an auditor is not expected to be an expert on all aspects, and the problem could be solved if it were possible to involve external experts. “In addition, we are trying to call on the representatives of the crypto industry to adapt a framework from outside Estonia within a few months,” he added.

Change means wage pressures

Auditing virtual currency service providers is also a new business opportunity in this market. “The salaries, workload and cost of auditors will likely increase in the near future,” Nõmper said. “There is also a growing number of companies that are passing the limit that requires them to complete a statutory audit.”

Currently, the average gross salary in audit firms is 2,120 euros, but in reality, it is more, according to Nõmper. “Statistics only take into account smaller companies, the owners of which pay more dividends than average and whose salary level is therefore artificially low,” Nõmper explained.

Increasing competition for labour is also forcing the salaries of auditors to rise. The Estonian Auditors’ Association has 500 members, of whom 350 are auditors and the remainder are audit firms, and there are 9,000 companies that require auditing services. “They cover 85 percent of the Estonian economy,” said Arengu.

At the same time, the audit industry needs to compete for professionals in both the financial and IT sectors. “The IT sector has the ability to offer much higher salaries, so the attractiveness of auditing needs to be increased,” said Arengu.

The digitalisation of both the auditing and accounting sectors could be enhanced in the future. It is currently being pushed forward, principally in regard to accountancy services. According to Tammeraja, a network between the information systems of companies is already being established. “Instead of e-mail, it is planned that important documents, including invoices, will flow through this new business-to-business network,” he explained.

Auditors have oversight, accountants less so

According to Märt-Martin Arengu, head of the Estonian Auditors’ Association, the quality level of auditors is indicated by the annual quality label, with the green label being awarded to 80 percent of the auditors operating in the market.

The quality of an auditor is assessed, among other things, by the client who chooses the auditor or accountant.

The accounting sector has to date been unregulated, but here too there are indicators regarding the quality of the service. For example, the Estonian Auditors’ Association annually compiles the Estonian Accounting Confidence Index. This is based on the so-called pure estimates of the accounts prepared by the accountants.

According to Arengu, the most common errors of accountants are related to the non-impairment of receivables, incorrect or non-execution of inventories or non-assessment of stock.

Another theme for the future: sustainability reporting

Head of the Estonian Auditors’ Association Märt-Martin Arengu said that another future trend is sustainability reporting. “This is a new type of reporting, the compiling and examination of which must be taken into account,” the expert said, noting that future reports will also reflect different principles of sustainability. Thorough monitoring is expected in the addressing and examination of the latter, as well as in general reporting