Blockchain brings opportunities in the form of a modernistic kind of accounting ledger. This article discusses the blockchain opportunities in the accounting sector and its implications.
Present day Accounting-
Most businesses today are in sync with automation and technology. When timely goals are set, the industry counts on mutual control systems, checks and balances, and this impacts day to day operations. This creates a need for systematic duplication of efforts, periodical controls and detailed documentations, all being laborious tasks.
Contemporary accounting is about a double entry bookkeeping to ensure the managers of transparency of records.
Accounting with blockchain-
Blockchain technology can hugely impact record-maintaining processes by way of accounting transactions getting initiated, processed, validated, recorded, saved, accessed and reported. The ever evolving business processes may have an impact on tasks like tax preparation and financial reporting and external auditors must understand blockchain since its used by their clients. There also appears to be a potential for better standardisation and thorough transparency in accounting and reporting, it also creates new opportunities and challenges to the audit and assurance as well.
Blockchain, as a vital part of Businesses-
With the help of blockchain, businesses are able to decrease costs of reconciling and managing ledgers, providing clarity over the ownership of the business assets and provides for an interlocking system of the lasting accounting records. It aids creating transparency since all entries get distributed and cryptographically sealed, barring the possibility of manipulating the records. This allows auditors to check and verify a huge amount of data in short span of time, thereby economising the audit process.
The Future of Audit-
With the presence of blockchain, the need for auditing can be laid off, considering all the transactions that make up that position are visible on the blockchains and this can have a huge impact in the way auditors work. Auditing is not just about verifying the details about the parties involved in a monetary transaction, but also about how it was classified and recorded. If the transaction credits the cash, is this outflow because of the expenses or sales, or is it paying off a creditor. With blockchain implementation, the auditors would have more time for focusing on such questions. Auditors are given the accounts reconciliations, journal entries, trial balances, sub-ledger extracts and spreadsheet files in various manual and electronic formats today. With the help of blockchain, the auditor will have near real-time access to this data through read-only nodes over the blockchains, letting them obtain the information required for the auditing in a recurring, consistent format.
Future opportunities with blockchain-
Till now we’ve established that blockchain technology can be applied to almost every area of the accounting and audit. A lot of present-day accounting department activities and procedures can be optimised with the help of blockchain as well as other modern technologies if applied in integration, including machine learning and data analytics. This would improve the value and efficiency of the accounting functions in a wider perspective.
Auditor of smart contacts and oracles-
Blockchain-based smart contracts being used in accounting and auditing are rising as a strong force, which can have an impact on the way financial audits are carried out. With their potential to autonomously perform audit procedures on auditor’s behalf and disclose the outcomes of such audit procedures, the blockchain-based smart contracts bear a great potential to improve audit quality. Smart audit processes are basically the autonomous audit processes, including the autonomous internal control tests as well as analytical processes, deployed on the auditor’s blockchain.
Administrator of blockchains-
As for the private blockchains, many organisations would hire an independent party, to execute the jobs of a central access-granting administrator. For example, CPAs can validate the implementation and monitor the blockchain’s protocols and if any of the blockchain’s users were to perform such functions, that individual could have a benefit over the blockchain’s other users. Having an autonomous auditor serves for this role creates more trust for all the blockchain’s users.