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4 Opportunities Blockchain Technology Brings to Auditors

Blockchain technology was first introduced after the global financial crisis in 2008 as the underlying technology of the crypto-currency known as Bitcoin. Since then it has gradually been adopted by a number of actors in the economy and society. For public sector auditing, possible implications include profound changes in the management of data and digital assets by audited organizations. This will necessitate a re-thinking of evidence collection (i.e. what to collect and how) to reach conclusions at the level of assurance required by professional standards.

Here are some opportunities that this game-changing technology offers to auditors.

Audit Tip 1

Enhancing their knowledge of business of the organizations audited.

There are multiple applications of Blockchain technology that are presently being developed specifically for government, such as tax collection, record management, voting, regulatory oversight, and identity management. Of course, other generic applications related to financial management and accounting, supply-chain management, cybersecurity, trade, and so on, will also be transferable to the public sector. Therefore, simply to understand how their auditees operate, public sector auditors will have to deepen their understanding of blockchain and how it is used in audited organizations.

Audit Tip 2

Ensuring the proper implementation of Blockchain applications prior to their deployment.

Blockchain is designed to eliminate third parties while ensuring instantaneous and secure updates of records. In that context, it is expected that the need for periodic financial audits will be greatly modified and possibly reduced. However, Blockchain implementation can be vulnerable. Auditors could add considerable value by conducting IT audits that would address risks and ensure that proper and effective controls are implemented.

Audit Tip 3

Leveraging Blockchain capacity to deliver real-time financial information to provide timely assurance.

Blockchain will enable auditees to monitor their processes continuously, supply an audit trail, and provide account analysis at the push of a button. In a Blockchain future, management could give a set of Blockchain digital “keys” to external auditors that would provide unprecedented access to detailed, time-stamped information about all transactions. Such access will significantly influence the audit strategies auditors will use.

Audit Tip 4

Developing a better capacity to use data.

Blockchain will intensify an already data-centric digital environment. Organizations using Blockchain could have a powerful new set of reporting tools, complete with full transaction visibility, to manage and communicate their financial condition. Legislative auditors will have to continue and even accelerate their efforts toward acquiring and using better and more comprehensive data analytics skills to match the growing quantity and complexity of data produced by the audited organizations. This will require the usual strategies already deployed in this area: hiring more experts, developing expertise among audit staff through training and professional certification, and staying on top of the information systems’ architecture and data holdings of audited organizations.

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There is much more to learn in our Research Highlights: Blockchain and Audit: Overview of Potential Impact on Legislative Audit.

 


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