How Blockchain Technology Could Affect the Future of Auditing

How Blockchain Technology Could Affect the Future of Auditing

Overview: Here’s why CPA auditors have started to use blockchain for simplified auditing

First proposed in 1991, blockchains were made popular in 2009 with the creation of bitcoin. The technology, however, is not limited to the world of cryptocurrencies. A blockchain is a method of storing information in a database that ensures the information is genuine without verification by a third-party.

Before we learn about the impact blockchain is having on the auditing industry, we need to learn a bit more about the blockchain appeal.

WHAT MAKES BLOCKCHAINS SPECIAL:

What makes blockchain different from a normal database is the structure of the information.

While traditional databases store information in tables that can be updated, a blockchain stores information in a block that cannot be edited once uploaded – hence the name “blockchain.”

Blocks of information are always placed in chronological order, allowing for rapid tracing of transactions.

THE IMPACT OF BLOCKCHAIN TECHNOLOGY IN AUDITING:

When it comes to the world of accounting, blockchain technology definitely makes itself known. One publication states: “Blockchain technology has the potential to impact all recordkeeping processes, including the way transactions are initiated, processed, authorized, recorded and reported.”

[DOWNLOAD PDF: Blockchain Technology and its Potential Impact on the Audit and Assurance Profession]

Other authoritative online resources refer to blockchain in auditing as a “game changer” with “tremendous opportunities” to be “more collaborative, efficient, reliable, and cheaper.”

Here is some insight regarding the growing relationship between blockchain and audits:

  • Blockchain can be used as a source of verification for reported transactions.  An example might be where, instead of asking clients for bank statements or sending confirmation requests to third parties, auditors can easily verify the transactions on publically available blockchain ledgers. – Deloitte
  • The technology platform has the potential to [offer] the audit process greater accuracy, transparency and ease. – RSM US
  • In federated blockchains, multiple authorities maintain the system and can keep some information from public view, allowing corporate transactions such as supply purchases and payroll distributions to be verified and stored on a blockchain while also preventing crucial information from circulating widely. – Chicago Booth Review

While there are many more examples of businesses welcoming blockchain technology into their processes, and encouraging others to do the same, not everyone is convinced about the technology. This is, in part, due to the confusion that some still have.

Let’s take a peek into how our accounting firm uses blockchain technology to help streamline our processes. 

HOW OUR ACCOUNTING FIRM USES BLOCKCHAIN TECHNOLOGY:

Our accounting team at Smith Marion utilizes this technology through Wolter Kluwers new addition to CCH AxcessTM, CCH AxcessTM Validate. This software allows us to collect in-depth transactional data from financial institutions directly using blockchain technology.

In accordance with AICPA Audit Standards, we use this technology primarily to:

  • track bank confirmations and
  • verify account information to gather confidential financial third-party audit evidence.

This allows us to do our work with greater speed and efficiency while maintaining our high standards of quality and security.

We strive to seek out new technologies such as this to provide the best service we can to our clients.

If you’re still unsure about how blockchain technology can help with auditing, schedule your free consultation with our Smith Marion team.

– Kenny Dockham, IT

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