👮Audit

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Audit by Coinsult: https://coinsult.net/projects/cats-wif-hats-in-a-dogs-world

cats wif hats in a dogs world - CoinsultCoinsult

A Cryptocurrency Audit is an examination of how well the technical specifications of a cryptocurrency align with the company's claims, as well as how secure the coin is from hacking attacks. The purpose of the Audit is to ensure that the cryptocurrency is free from errors and critical vulnerabilities.

For users and investors, it's important to understand what types of audits are often encompassed by the term "Audit":

1. Attestation Report

This includes an evaluation of an employee, process, or organization. While the document's structure varies by application area, it cannot replace a full audit that additionally considers complex interrelations within the company. Among cryptocurrency projects, such checks are mostly requested by centralized exchanges and stablecoin issuers. In the future, this process is likely to expand due to regulatory pressure and the creation of global standards for required documentation.

1. Agreed-Upon Procedures (AUP)

Used to confirm and analyze a specific fact or event according to preliminary requirements of the interested party. For example, it might verify the presence of cryptocurrency in a wallet but without providing any connecting data. One of the latest public AUPs described an audit by international auditor Mazars to confirm the presence of assets in Binance's cold wallets. Typically, such results do not provide users with valuable or useful information: an exchange could simply deposit assets into the necessary wallet for the audit and then withdraw them again.

1. Service Organization Control (SOC) Reports

These allow for monitoring of third-party service data to have a comprehensive view of a partner organization's operational processes. There are two levels and three types of reports: finance (SOC1), security and confidentiality (SOC2), and a public version of security assessment without sensitive data (SOC3). While cryptocurrency projects are not yet rushing to undergo such checks en masse, this may change over time as trust is a crucial part of the business.

1. Smart Contract Audit

Examines the code for errors, vulnerabilities, and the correctness of the implemented logic. This also cannot be called a full audit: there are no global accepted standards and guarantees from auditing companies. However, thanks to such checks, developers, investors, and users gain additional confidence when interacting with the application. Projects are advised to regularly test the security of their code.

1. Proof of Reserves

Verifies the presence of declared funds at specific storage addresses. Theoretically, this should increase trust from clients and investors. However, without information about a company's liabilities, any verification of its reserves is meaningless. Essentially, this is just an element of financial reporting that can be easily manipulated to create a positive impression without real guarantees. Therefore, cryptocurrency companies (such as Binance, Nexo, Tether, and others) often face criticism for calling such checks audits.