Blockchain technology is relatively new and was originally devised for the digital currency "Bitcoin". A blockchain facilitates secure online transactions. It allows for the creation of a decentralized digital ledger that is used to record transactions across many computers that cannot be altered retroactively. In other words, instead of companies keeping and reconciling records of the same transaction in their separate privately managed ledgers, both sides of the transaction are recorded simultaneously in an on-line shared digital ledger. This technology has the potential to impact the accounting industry, especially the auditing process.
The most significant implication is that data recorded in this shared ledger is more reliable. It reduces the potential for fraud and error as both parties must agree on the details of the transaction before it can be recorded. In addition, the ledger is secure and nearly impossible to hack as this would require taking control of all the computers in the network. Furthermore, an entry cannot be deleted from the ledger once it has been recorded. Another transaction must be recorded to reverse the original entry, and a new entry setup.
Due to this increased reliability on the information recorded in the ledger, the amount of time spent during an audit on transactional testing may be greatly reduced. The blockchain technology provides an extra layer of validation that does not currently exist. This in turn could lead to more timely audits and would allow for increased testing in other areas. An auditor may be able to provide more value-added services if they are able to rely on the financial information provided by clients generated using blockchain technology.
There are still, however, many variables and unknowns that exist to make definitive assumptions on what the impact of this technology may be. For example, will the blockchain itself be audited? How much of this technology will auditors have to understand to properly audit the information? These are just some of the questions that exist right now that make it impossible to project what the future holds. There is no guarantee that blockchain will even be successful and widely used. However, it is always a good idea for accounting firms keep an open mind and prepare for the potential impact that this may have on the current processes in place.
