Blockchain is a distributed transactional database in which transactions and related details are recorded and verified through consensus algorithms. Once a transaction is recorded, it cannot be changed or canceled. Thus, blockchain offers features—transparency, security, immutability, accuracy and traceability—that are key features in auditing. Its use will have several kinds of impacts on the auditing profession.
The audit profession will be more IT-oriented, and its main objective might no longer be to ensure the regularity and sincerity of an organization’s financial statements, but instead to review the information systems and, in particular, to ensure that blockchain technology is properly deployed. Auditors might even have to certify the blockchain itself.
Thus, financial and IT auditors will need more in-depth technical and technological knowledge and, at the same time, auditing firms will have to hire more IT auditors and other types of profiles to fully benefit from the various technologies that are currently being developed (i.e., blockchain, big data capabilities, data visualization).
At the same time, the auditing standards will have to evolve since, currently, there are no audit standards describing how to conduct an audit of blockchain, whereas some financial auditors already face the challenge of auditing enterprises active on blockchain or organizations that have set up blockchain platforms to execute some of their business processes.
Finally, thanks to its characteristics, the use of blockchain makes it possible to automate audit tests, or at least to facilitate them, thus reducing the length and cost of audits. Some audit-related tasks that are time consuming and do not require specific technical expertise and are currently performed by junior auditors will disappear. As such, audit firms will hire fewer junior auditors for the benefit of more experienced professionals. Those experienced professionals will use new technologies such as blockchain and their professional judgment to go beyond the pass/fail evaluation of the traditional financial audit report to make more sophisticated analyses, provide better insights and forward-looking recommendations to their clients and, thus, become their strategic business partners. This situation might, however, represent an ethical challenge for the profession, as Certified Public Accountants (CPAs) are currently not authorized by the US-based Public Accounting Oversight Board and limited by other national bodies in the kind of advisory services they can provide to their audit clients.
Read Nathalie Brender and Marion Gauthier’s recent Journal article:
“Impacts of Blockchain on the Auditing Profession,” ISACA Journal, volume 5, 2018.