Elvin — I think we need to take a step back first as what I’m discussing above would not replace a financial statement audit. What’s discussed above is specific only to a single transaction. I used the word “audit” to draw an analogy on miners in the blockchain (since we’re talking to accountants after all here). I think a simpler example would be that of a notary. Picture a notary essentially just verifying the transaction — ensuring that Alice did in fact pay Bob $60 (if it was done on the blockchain). This transaction then gets sealed by the notary for public record. That’s about as far as public blockchains can currently go.
The blockchain code (currently) cannot perform diligence around revenue recognition principles, record a convertible debenture or other complex accounting transactions. This is why accountants would still be involved in the process. Also, there would still be audit risks that would need to be addressed such as related party transactions and hence auditors would still be required in the earlier stages. However, both parties would now be performing their work at a higher level, outside of the details in transactions (thus freeing up time, resources and likely costs).
There is a potential however to bridge this gap and that would be through the use of sophisticated ‘smart contracts’ (I encourage you to look in to Szabo’s work on this if you are interested). As he would describe it, the “wet code” (in this case ASPE, IFRS, US GAAP) would have to be merged with the “dry code” (computing language) to create instruments that would automatically produce the desired results based on the underlying blockchain data. In this case — that would be a set of financial statements. This is obviously beyond the scope of what I’ve written above as it can get quite complex.