Blockchain technology has a great influence on accounting, auditing and technology trends. It means that financial, accounting and auditing experts cannot ignore in the context of the developing 4.0 Technology Revolution storm.
There are still many unknowns with respect to how blockchain will impact the audit profession. Blockchain is already impacting auditors of those organizations using blockchain to record transactions and the rate of adoption is expected to continue to increase.
Please feel free to take a look about some advantages and disadvantages from this technology in audit sector with AMC Group.
Advantages of Blockchain in Audit Application
1. Blockchain as Secure and Mistake Reduction Tool in Audit
By creating a single ledger on a computer network in blockchain, companies, customers, banks and tax authorities record and share information. When any of them add information, the ledger will automatically verify and adjust the data. Every daily transaction is recorded and authenticated, so the integrity of the financial records is guaranteed.
Blockchain application helps minimize the violation possibility. When a block of data is added to the chain, the rest of the network must verify the data, detect errors when comparing complex and different information from different sources.
2. Blockchain Make Audit Process Fast
Contrast with traditional financial transactions where information might take up to a month or more to be cleared, this verification characteristic could impact the audit process. Instead of assessments at year end, audit firms will perform continuous on-line assessments throughout the period under audit, and spend a short time to handle than previous.
3. Blockchain Help Audit Information No Change
In case transactions are recorded in an immutable blocks, with no apparent way of being altered, audit information in blockchain will not be changed and also create a perfect audit trail. The technology offers enhanced transparency to financial information when nobody can impact to the input figures.
Additionally, traceability will allow auditors to trace what happens with an asset over time while, at the same time, providing proof of transactions in real time.
4. Blockchain To Reduce Transaction Cost
Blockchain enables decentralized groups to work together, from anywhere in the world to reduce middle costs. This could significantly reduce office and staffing costs by taking the work from the people.
Blockchain might make the auditor easier to check every single transaction, information using code. This would also make them more convenient to investigate fraud, because the blockchain systems could highlight and investigate any anomaly.
Disadvantages of Blockchain in Audit Use
Although blockchain promises highly secure audit transactions, however, the successful adoption of blockchain is dependent on the security of the underlying environment from human. In order to provide the necessary level of assurance, the audit processes need to shift further towards the assessment of operating effectiveness of the IT. Hereby we can consider some shortages of blockchain in audit application.
1. Hard to Change Information be Inputed
If an employee accidentally or deliberately enter a wrong number to a wrong or unauthorised recipient, there is currently no way to reverse that transaction. Auditors are therefore required to assess whether effective automated controls are in place to validate transactions before they are executed.
2. Hard to Control IT from Auditor
With the rising adoption of blockchain technology, a different professional audit expertise will be required to satisfy the expectations of business owners in this new world. Auditors is not only good at audit skills but also conversant with the basic blockchain technology and work with experts to audit the complex technical risks associated with blockchain.
The auditors need to consider the risk that the information is inaccurate or not. They need to extract the data from the blockchain and consider whether it is reliable. It may require them to understand the reliability of the consensus protocol for the specific blockchain. It is obvious to need more time.
The auditors also need to evaluate audit policies for digital assets, which are currently not directly addressed in international financial reporting standards. They will need to consider how to make the audit procedures to take advantage of blockchain benefits as well as address any arising risks.
3. Blockchain Can Not Replace Human Audit
Financial statements reflect the assertions, and it cannot be easily summarized or calculated in a blockchain. A blockchain is unlikely to replace these judgments by a financial statement auditor.
The auditors who want to be at the forefront of their profession to learn the details of how blockchain will change their audit programs. They should begin contributing to blockchain’s development. Because this technology will also eventually change requisite job skills, and will be an opportunity for professionals to be both competent in auditing and programming.
Conclusion
Application of science and technology is an inevitable trend in daily work, especially those that always require quickness and accuracy such as accounting, auditing and finance.
Maybe now, blockchain has not officially replaced jobs in auditing, but it is not too soon for us to study this technology and thereby build a reasonable strategy. The next step will be the global collaboration of regulators, auditors, companies, and compliance officers, all exchanging experiences on the development and implementation of blockchain.
In the current fast developing technological context, open and proactive approach to new information is the only way to succeed. The greater influence level is the opportunity for anyone, any entity who have been active in this field. It is AMC Group’s pleasure to show you some basic news in this technology.
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