With the advent of the cutting-edge technology, that is blockchain, the rest of the world has had to keep up with the growing usability of the applications that are being developed on it. The applications of blockchain are increasing exponentially and are playing a vital role in the introduction of new methods for financial exchanges all over the world. This calls for changes to be made in the means of auditing several corporations, that are using blockchain. Talking to Forbes about blockchain, Russell Guthrie, the CFO of International Federation of Accountants (IFAC) stated that:
New technologies, such as blockchain and artificial intelligence are advancing the global profession, raising the bar and driving demand for new workforce skills and competencies.
In the early years of release of blockchain tech, there were no specified rules about how to account for the transactions that were being made through cryptocurrencies. A wave of concern was created in the investors about how they were going to get their companies audited. Talking to Bloomberg, the founder and president of Chamber of Digital Commerce has stated that it already is a big business issue.
We have many companies that are members of the Chamber of Digital Commerce. They are operating in the blockchain ecosystem and if they are holding or have on balance sheet digital assets, they cannot get audits. They’re having a very, very difficult time obtaining an audit.
Regardless to say that there was a crucial need for specific standards to be defined for auditing the firms. According to Robert Graham, who is a partner and head of the digital currency practice at New York-based accounting firm Friedman LLP:
The more sophisticated investor will want things to be more standard so that you can compare across the industry, so that will be one of the factors to drive how quickly the FASB operates on this,
Auditing a firm requires a large number of personnel to look at the transaction, company financial records and the public financial records as well. That is where the advantage of blockchain, being decentralized, comes into play. Being decentralized means that the record of transaction being public, so essentially there remains a little to no need for external auditing. In addition, it would potentially save a lot of time and money for the firms.
Since then, multiple firms have been taking initiative to improve the overall services provided by them in order to accommodate the changes that are taking place due to blockchain technology. Namely the “Big 4“, some of the largest auditing firms have taken the initiative.
In the mid-2016, KPMG introduced the digital ledger services to its clients and demonstrated the advantages that this revolutionary tech will be providing. It lays emphasis on how the transactions would be carried out safely, a faster service and decrease in the cost by automating the whole process.
Blockchain represents not only a dramatic shift in how financial services organizations will manage transactions in the future, but also how they structure their internal operations going forward,
Bill Cline, KPMG’s U.S. Financial Services lead for technology and innovation, stated;
This is something that all financial services companies must be considering and accelerating.
KPMG has also devoted more than 80 partners and affiliates to the production and integration of the blockchain tech as it deems it necessary for changing world trends. According Microsoft’s director of business development & strategy for blockchain, to Marley Gray:
Together with KPMG’s experience in successfully transforming business models, we are pursuing innovative applications of blockchain technology that will help our customers worldwide achieve their strategic goals,
PwC also launched a blockchain-based technology called Vulcan Digital Asset Services, which is an application that can be used for everyday banking, commerce, payment and investments overseas. Robert Allen, PwC Director and Vulcan Lead, said:
We’ve created Vulcan because at PwC we believe new technology supported by advances in cryptography and network computing – particularly blockchain – will transform the consumer, government and financial market industries and shape the next generation of money.
Ernst and Young leaped to integrate blockchain into their company and became the first adviser firm to accept cryptocurrencies for their services. Payments can be made to the firm for their services using bitcoin. The firm has been taking multiple steps to promote and integrate the blockchain tech and has started many projects in order to do so including multiple applications. It has been officially on their agenda according to their website. Marcel Stalder, the CEO of EY Switzerland said,
It is important to us that everybody gets on board and prepares themselves for the revolution set to take place in the business world through blockchains, smart contracts and digital currencies.
Deloitte has broader network of labs all around the world. Their global blockchain community consists of more than 800 professionals across 20 countries. They have created over 30 blockchain-related archetypes, covering many use cases, which have utilization in the field of medical, pharmaceuticals, as well as handling overseas transactions and investments. They have developed a number of blockchain application and have aided multiple clients to do so.
The incorporation of blockchain has a myriad of pros that include reduced auditing so that the auditors do not have to spend a lot of time looking at financial reports. They can improve efficiency, reduce error, make reconciliation easier by the use of smart contacts but the transactions over blockchain can be fraudulent, illegal or unauthorized. Whether the use of blockchain is safe or not, the auditing firms have been leaping towards the integration of the technology because of the advantages that it offers.