Blockchain makes it possible to write verified transactions to a distributed ledger in a secure fashion, without a central authority, between untrusted parties, creating an undeniable past, value for each node and adding value (trust) to those transactions. Audit technologies can help reduce the length and complexity of audits. It is also very likely that, in the next few years, more audits will be augmented by cognitive technologies, which confer many of the same benefits and may portend even greater potential than other technologies for the audit. Let’s revisit the basics of a general ledger (GL) as we know it today. A GL includes all the assets, liabilities, equity, expense, and income ledgers, which make up a complete set of the financial transactions records. To make sure a GL is accurate, you’d use a double-entry accounting system.
Blocks are linked creating the so-called blockchain by including in each block header the hash of the previous block header. The first-ever block on the blockchain is called the genesis block. Figure 2 compares the two kinds of blockchain projects (public/private). The rapid evolution of technology is quickly changing the way business is conducted across all industries, even some that are centuries old. For example, artificial intelligence (AI) can drive down the cost of health care by more accurately determining correct drug dosages for patients and potentially reducing errors.
Then when the time comes that blockchain technology directly impacts your business, you’ll be ready. There are signs that the accounting profession is entering a new age of enlightenment with blockchain. Broadly speaking, financial systems—especially accounting systems—are being pushed from the physical world to the digital world. Blockchain technology will likely play a role in that transition.
The impact of blockchain technology on audit
Many organizations will likely be reluctant to share sensitive data (i.e., contract information, payroll) on a public blockchain and are asking important questions about impairment definition the nature of blockchain and its future uses. The data requirements would be large compared to a traditional system and is a concern that needs to be addressed if blockchain is to enjoy widespread adoption. It is likely that many enterprises will try to harness this new technology and create value with it.
What Does it Mean for the Profession?
- When implemented correctly, the blockchain provides a high degree of trust, which some accountants worry will reduce demand for traditional accounting work.
- But it’s just going to require more expertise and making sure things are configured right.
- This means that it’ll also save you and your bookkeeper tons of time while also making it easier to audit your own financial records.
- There are signs that the accounting profession is entering a new age of enlightenment with blockchain.
Today, the use of blockchain in the financial field is still largely in an investigative stage. From what I’ve seen, nearly all major financial organizations are exploring how to best implement blockchain technologies into their infrastructure, with tech giants who have traditionally been tied to the financial industry beginning to roll out various products. Those who work in accounting don’t yet need to know all of the ins and outs of blockchain technology, but it’s definitely time to keep an eye on developments at least within your organization.
CPA.com accounting profession megatrends, 2019
The promise of this powerful combination is not just a game changer for the audit world, but also a benefit for organizations and a boost to investor confidence overall. Blockchain is a technology that promises to change the way business is done. Deloitte’s 2019 Global Blockchain Survey found that 53 percent of respondents say blockchain has become a critical priority for their organizations (up 10 points from the prior year), and 83 percent see compelling uses for blockchain. Blockchain technology reduces the possibility of disputes by fraudsters and scams.
If the result is less than the target value (pattern), the computed hash solved the proof and the block is added to the blockchain. For an experienced practitioner, blockchain might create a feeling of déjà vu recalling the hype and excitement of the World Wide Web in the early 1990s. Many saw resources flocking to it and efforts to develop the best ideas.
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