A plug-in audit?
It’s likely that auditing will also be revolutionized by blockchain.
Key to the technology is its record of transactions, which enables something akin to real-time auditing by default. Indeed, blockchain has been dubbed “digital era double-entry bookkeeping” because of its similarity to old accountancy principles.
Blockchain might also be able to replace random sampling by auditors, by making it easier and more effective to check every single transaction using code. This would also make it easier to investigate fraud, since real-time systems could highlight and investigate anomalies.
Blockchain’s potential effect on auditing has been likened to that of a plug-in, always-on audit. But what might this mean for finance and audit teams?
New efficiencies can help enable a culture of innovation
Blockchain’s rise doesn’t mean the end of the finance or audit team.
Real-time auditing and reporting will release CFOs and their teams from certain routine, time-consuming tasks so that they can play more strategic, creative roles – and focus on new ways to deliver future business value, rather than keeping track of past costs. And human interpretation of data and transaction patterns will still be needed to generate the new insights that can lead to business growth.
Collaboration will be essential
Cross-industry collaboration is also key to establishing blockchain, because blockchain’s benefits derive from its network effects: the technology becomes exponentially more powerful the more organizations or individuals use it.
That’s why it’s great news that 42 of the world’s leading banks are setting aside their competitive instincts to collaborate on blockchain experiments that assess how it could be used to affect finance in the future.
The regulatory bumps in the road
Blockchain’s widespread adoption could trigger significant amendments to some of the world’s most established finance and trading regulations, so financial service providers also need to work with regulators and central banks to ensure the innovation and regulation works in harmony with existing legal and regulatory frameworks – not least because blockchain, like the internet, transcends regulatory jurisdictions and national borders.
A threat to established financial service providers?
Significant disruption may be on the way for the traditional financial sector as major players and new challengers begin to bring blockchain-powered technology to the marketplace. What’s to stop strongly branded businesses founded in the technology space, like social platforms or software developers, from becoming enablers of value transactions or financial service providers?
A change is gonna come …
Leaders of organizations in all sectors should start to ask:
- Does blockchain make any part of my business model redundant?
- What impact could blockchain have on the regulatory frameworks within which our organization operates, or which it sets for others?
- Could blockchain help us demonstrate greater transparency and build digital trust?
- Does blockchain change what some of my people will do with their working day?
- Which new entrants could blockchain bring to my sector, and what competitive advantages and disadvantages could this have?
Although blockchain may be the finance world’s buzzword, it’s not all hype. Its key advantages – trust, transparency and efficiency – are vital to the success of finance and audit firms and their clients.
Summary
With blockchain poised to revolutionize finance and audit, leaders should begin thinking now about the potential impact for their companies.
