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With the aim of improving the ledger transaction and to provide transparency in the accounting and auditing, new blockchain technology has been launched to improve the accounting and to open up the probability of real-time audit. In recent times, the impact of Blockchain on auditing and accounting through distributed ledger arrangements, recording real-time transactions cannot be ignored.
Before knowing the potential uses of Blockchain in auditing and accounting are. Let us first know what is accounting, auditing, and Blockchain:
The potential use of Blockchain in the Accounting and Auditing are as follows-
Blockchain is more transparent than when it is pushed through paper-heavy processes which result in accuracy and consistency. It allows permissible access to all the participants which maintains the transparency in the transaction histories. Blockchain helps in maintaining the historical data that helps in verifying the authenticity of the assets.
Blockchain helps in easy tracking of the Audit trails which helps an examiner in the accounting process to verify the figures such as revenue. Further, it also helps in validating the accounting entry.
Blockchain in accounting and audit has resulted in authenticity in transactions i.e. it has greatly reduced the potential for errors when reconciling complex information from multiple sources. Further, under blockchain accounting records are not alterable, even by the owners of the accounting system. Authentication of transactions are done in such a way that-
Blockchain technology has the potential to greatly reduce or eliminate the need for auditing resources which as a result disrupting the accounting profession as a whole.
The impact of Blockchain on auditing process is mentioned below:
Blockchain technology is a complex process but is expected to well run the process of financial reporting and auditing. In the Blockchain world, Auditor gets continuous and real-time access to information in a standardized manner which saves a lot of time and effort required in the Accounting and Auditing process.
However, in case of absence of Blockchain technology, the details and documents i.e. (Reconciliation statements, ledger & journal entries, bills, vouchers, and other supporting documents) are provided to the Auditors in physical or electronic formats and the Auditors invest a lot of time and energy in assessing the authenticity of each transaction.
By using encrypted codes, Blockchain technology makes it possible to check every single transaction. It makes it easier to detect irregularities on a real-time basis and enhances effectiveness in the audit process. Further, with the help of Blockchain technology the auditors creating real-time alerts about fraudulent transactions.
Real-time reporting on Blockchain will release a higher level of management to focus on other core areas. People at the higher level can free themselves from the tedious work such as Interpretation of data and pattern of transactions. Further, they can also channelize their energies and knowledge on more creative aspects.
Blockchain technology has not only transformed the existing audit process but has created new opportunities and roles for auditors in the future. Some of the opportunities are-
Blockchain is based on smart contracts that are used for automating business processes. In Blockchain technology, proper due diligence is required at each stage. The auditors should be involved in the role of proper due diligence and proper business logic. However, in case of absence, it will be difficult for Blockchain users to track errors and irregularity.
For examining the blockchain system and for conducting due diligence users would want to involve the auditors as a third-party.
For evaluating the legal and administrative aspect an auditor could take up the role of a Central Administrator for Blockchain in the future and can also avoid the biased judgment in case of the participants of the blockchain platform performs the same role.
Blockchain is enhancing the quality of audit and results in the notable changes in the existing framework of the accounting and auditing process. However, the role of the auditor will remain the same i.e. the auditor will have to use their knowledge and professional capabilities to check the authenticity of the data. In such a fast-moving and competitive environment, it is very important to adapt to the new technologies and changes are the only way to remain successful.
Also, Read: Blockchain Has Potential to Re-Engineer Cyber Security.
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