Blockchain solutions are helping industries to solve complex problems with the use of its platform and technology. Blockchain technology is a step towards modernisation of an organization’s digital infrastructure which allows them to reorganise their assets in a systematic manner and maintain records. Yet, we are far from leveraging its true potential and putting it to regular use.
Also Read: Here’s How You Can Build a Career in Blockchain
Since the advent of blockchain-based bitcoins, there has been an extensive exploration into blockchain’s potential. Today, various blockchain-enabled use-cases have shown capabilities to transform industries such as banking, financial services, manufacturing healthcare, telecommunication, retail and so on.
Understanding Blockchain’s Potential
Blockchain offers a new way to record, process, and store financial transactions and information, and has the potential to fundamentally change the landscape of the accounting profession and reshape the business ecosystem. Industry leaders must understand and work on implications of blockchain to the auditing process and elaborate on opportunities and challenges of blockchains.
Blockchain has wide-ranging implications for data processing, transmission, storage, and security, and has the potential to create a new ecosystem for the handling of accounting information. Although blockchain technology is still in its infancy, the ‘Big Four’ accounting firms and many other financial institutions globally have already noticed blockchain’s potential and actively engaged in its experiments, development, and investments for building proof of concepts. For instance, KPMG has partnered with Microsoft to create use cases that apply blockchain technology to business propositions and processes.
Implications of blockchain for auditors
Performing audits in a blockchain environment would be totally different. It would basically be redundant if all the transactions are visible and tracked immutably. This proposal would mean a profound change in the way the audit industry works. Blockchain can help auditors to reduce or eliminate financial scrutiny and audit and focus on fraud detection and analysis.
For instance, a blockchain could show ledgers with transaction records between parties. But it won’t give you any insight into who the receiving party is, or what is its classification. If it is a credit transaction, blockchain-based system won’t tell you if it is a sundry expense to the company or a purchase of an asset? An auditor can focus on such questions and provide judgemental insights into their audits.
A New Spectrum of Skill sets
As a result of the above, the skill sets in accounting and auditing processes will change dramatically. Capabilities such as technology advisory, functional, and technical consulting and other value-adding activities will expand. In the long term, more and more records will move onto blockchains, and auditors will be able to check transactions in real-time and perform an audit of those transactions. Due to digital transformation and security initiatives, the adoption of blockchain technology by customers (auditees) would make it a must-learn for auditors.
Act as a Conduit
Auditors and advisors need not be technology-adept. They must learn the process-layer and understand how to advise customers on blockchain adoption and understand the impact of blockchain on customer’s business and end-users. They can act as a conduit between the business and blockchain by having informed conversations with both technology leaders and business stakeholders.
Focus on business imperatives
Real-time auditing will release CFOs and their teams from redundant routine tasks to focus on more strategic roles such as new ways to deliver business value. Yet, manual interpretation of transaction patterns will be valuable to generate insights and facilitate business-decisions.
Conclusion
Financial and audit firms globally are collectively exploring blockchain to assess its application on the financial ecosystem and understand how it will affect finance in the future. Blockchain’s widespread adoption could trigger significant changes to the finance and audit industry. ‘Financial services’ leaders must work with auditing leaders and regulators to ensure that the framework of innovation and regulation over blockchain technology is seamless, secure, and long-term. This will change the way we consume money, how it flows, and needless to say, how it is audited. Blockchain in auditing is a promising start and may soon become a disruptive trend.
