What opportunities for auditors will arise with blockchain?
Posted by Sjoerd-Jaap Westra
The accounting auditor has managed to weather the scandals of Enron, WorldCom, Lehman Brothers, and Bernie Madoff only to now be confronted with a new and revolutionary concept: blockchain. What opportunities for auditing professionals will arise with the coming blockchain revolution? In order to fully appreciate the magnitude of this new technology, you need a point of reference, or maybe several.
There are three examples that you might examine in order to truly appreciate the enormity of this opportunity. The first would be the very origins of accounting that date as far back as the ancient civilizations of Mesopotamia, and although you weren't around to witness the impact, trust your instincts, it was phenomenal. Next would be the invention of double entry accounting by Luca Pacioli, also known as the father of accounting. The third and final example would be the explosion of the Internet in the late 20th century. Now are you beginning to understand the potential implications?
The current auditing process as it exists today, has remained relatively unchanged over the last several decades. Auditors test a reasonable sample of accounting entries to ascertain accuracy (with physical documentation as well as computer reports), they then verify this information with trading partners, and in some instances will speak with various employees to explore any possibility of unusual or unethical accounting practices. What if technology could streamline this process and offer new opportunity to the field of auditing?
As the technology continues to evolve and develop, there is potentially a great need for auditors to operate as liaisons between global trading partners and their chosen payment system. Auditors with the ability to actually verify the flow of information between partners, funds through a payment system, and then record the information into blockchain ledgers. The new position satisfies two emerging needs: standardization of global accounting practices with real-time auditing of individual business transactions.
This guy will attend more than just accounting classes. He will be the new line of defense to protect the accuracy and integrity of blockchain ledgers that are based solely in a cyber existence. Just as large companies and governments currently hire individuals to protect their proprietary information from assault, so will they also begin to require auditors with cyber training protecting their financial transactions in cyber space. Theoretically, blockchain ledgers are untouchable and unchangeable. To date, the blockchain ledger has proven extremely resilient to attack, but just as with any new technology, the hackers and thieves will make every attempt to prove everyone wrong.
As platforms and software are built to accommodate a growing blockchain industry, their products will need to be tested and re-tested by an auditor trained in not only auditing, but also blockchain technology. The potential here is exponential. Platforms and software to accommodate a wide range of industries, payment systems, and business financial records offer opportunities comparable with those of the early years of integrating business computer systems.
The larger opportunity for the accounting industry as a whole, and by default the auditors within that field, is that the need for standardization, trust, and compliance are issues that have eternally plagued auditing and financial record keeping. Blockchain not only offers the opportunity to solve one issue, it can potentially solve all three. History as it pertains to accounting and auditing of accounting records, has at each major advancement taken us closer to a truly transparent, effective, and globally standardized means of verifying business transactions. Future opportunities for auditing are as bountiful as the many blockchain possibilities.
The Future for Accounting
Interested in learning more about the future for accounting?
- Coindesk: How the Blockchain Could Stop Firms Cooking the Books
- Digital First: How Bitcoin Could Transform Accounting As We Know It
- Toptal Developers: Blockchain Technology Explained: Powering Bitcoin