What it is
Entities that hold digital assets with a third party depend on that party for existence, rights and the absence of hidden claims. A confirmation is the audit procedure that goes to the custodian for those facts. This template asks for quantities by asset at a stated date and time, and for the terms on which the custodian holds them.
Beyond balances, it asks the questions that decide whether the assets are really the entity’s: segregated or pooled holdings, any right to pledge or lend the assets, who controls the keys, staking and lock-ups, encumbrances and incidents in the period. The auditor controls the request and the reply.
When to use it
- On audits of entities that hold crypto assets with a custodian, trust company or similar third party.
- At each period end where the quantity at the custodian is material, with the cutoff time stated.
- When the audit plan covers existence, rights and obligations and cutoff for digital assets.
What’s inside
- Request letter with a direct-reply instruction and a stated cutoff time
- Holdings table by asset with quantities per the client and the custodian
- Questions on segregation, rehypothecation, key control, staking and lock-ups
- Encumbrances, fees, transfers in transit and incident reporting
- Custodian response block and auditor confirmation control log
Standard cited
This template follows AU-C 505. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use. See AU-C 505 explained.
Questions
Does a custodian confirmation replace testing the entity’s own wallets?
No. It covers assets held for the entity by the custodian. Assets held in wallets the entity controls need other evidence, such as inspecting on-chain records and testing control of the keys. Use this letter for the third-party part.
Why does the letter ask about rehypothecation?
If the custodian can lend or pledge the assets, the entity may hold only a claim against the custodian instead of the assets, which affects rights and obligations and may need disclosure. The confirmation puts the question to the custodian directly.
Why state a cutoff time?
Digital assets move at all hours and across time zones, so a balance as of a date can mean different things. State the time zone and cutoff time so that the client’s and the custodian’s quantities are compared on the same basis, and list transfers in transit.
Related templates
- Audit Program: Entity Holding Digital Assets
- Digital Asset Fair Value Rollforward (ASC 350-60)
- Bank Confirmation Letter (AU-C 505)
- Confirmation Control Log (AU-C 505)
Last updated 11/05/2026. All free templates.