Blockchain, like other new digital technologies (robotics, big data, analytics, artificial intelligence, etc.), is changing practices within companies, including auditing firms, whose mission is to certify accounts and advise companies. . If the information processing and validation system, which is the object of the audit itself, is changing with the blockchain, this has an impact on the activities of companies and the way they will design their future economic model.
Aware of the very significant development potential of blockchain, auditing firms invest several billion dollars annually in this technology. Like other technologies, blockchain presents challenges and opportunities that auditors need to understand and embrace, otherwise they risk seeing their profession practiced by other tech companies. How will blockchain transform the profession? What is the perception of auditors of the possible implications of this technology on the audit process and on the development of their profession?
Based on a qualitative study conducted on a sample of auditors involved in this technology within the “big four”, which designate the four accounting firms in the world, our results show that blockchain could have an impact on auditing firms. at least six key levels.
1. Towards a more relevant audit
The blockchain facilitates the dematerialization of accounting documents that are no longer paper documents but electronic documents with a unique and inviolable identification. This procedure allows the simultaneous and secure dissemination of information and documents, which gives greater confidence to the data communicated between the various stakeholders.
The accounting information, which represented specific information for each company, will be transformed, with the blockchain, into a shared and collectively certified information system.
According to our interviewees, this process has a positive impact on the auditor’s work. Since all information and documents stored on a blockchain are available, auditors will be able to access all this information without having to wait and request it from their customers. A member of one of the “Big Four” is happy:
“The audit process can be done remotely, saving time and money previously spent on collecting and verifying evidence. “
This time savings will allow auditors to focus on high value-added activities for the client such as analyzing year-end accounting estimates, evaluating blockchain-level control systems, estimating risk areas, etc. This has the effect of increasing the efficiency of the audits carried out and improving the quality of the audit.
2. Towards a comprehensive data audit
Currently, the audit is based on historical data from the previous year’s financial statements and provides only a reasonable level of assurance. The auditor’s opinion is mainly based on an approach based on the analysis of the risks associated with the company, its organization and its internal control system and on the use of sampling techniques in the audit activity. However, as one interviewee pointed out:
“In addition to offering authentic and encoded information, the blockchain offers the possibility of evolving the audit process from a control of a reasonable part of the information available to an exhaustive control of all available data …”
Indeed, since the blockchain offers access to all company data that becomes immediately available, the auditor can, in this case, carry out an audit using all this data. This is particularly possible when combined with other technologies such as big data, robotics and analytics.
3. Towards an audit focused on the verification of controls
As some fraudulent transactions can be tucked into the “chain”, the effectiveness of the internal controls surrounding the blockchain also becomes a crucial element in the audit process. Therefore, the audit will therefore focus more on testing the control systems implemented in the blockchain than on testing transactions as traditionally, one interviewee points out:
“The real question for the auditor would no longer be to verify the authenticity of the transactions concluded, but to verify the effectiveness of the control systems put in place to secure them”.
When faced with a specific blockchain, the auditor will need to focus on things like the quality of the blockchain code, protocol changes, distribution of power among peers, etc. rather than on direct transaction testing to ensure the reliability of the information hosted on this blockchain.
4. Towards an ongoing audit
Today the auditor intervenes to verify the old information relating to the past year. The widespread use of blockchain in business practices, according to our respondents, will offer auditors the opportunity to broaden their audit scope by implementing an ongoing audit process that enables validation of information as it is produced.
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Indeed, several verifications of the information that were part of the traditional (post-closure) audit process will no longer be necessary if this information is stored and can be examined on a blockchain. For example, inventory that was done manually can be done quickly and continuously with the blockchain.
5. Towards a more strategic audit role
Once blockchain technology is integrated and applied more broadly, the role of auditing firms will evolve, according to our respondents, to a more strategic role. Given the availability of data via the blockchain, the auditor will be able to analyze this data, interpret it to give it meaning and make it useful for managers’ decision making. As one in four major partners recognizes:
“Our clients have very often perceived auditing as a low value-added cost center. Blockchain now offers the profession the opportunity to make auditing more relevant, allowing clients to identify their weaknesses, improve their control systems and develop their businesses. “
The auditor can then move from a simple information reliability checker to a strategic consultant for his client and then to an essential partner.
6. Towards the development of new services
Finally, blockchain offers listeners the opportunity to offer new services. According to our interviewees, auditing firms can, for example, play the role of planner and coordinator of potential participants in a blockchain. Likewise, they can leverage their IT audit expertise to develop new blockchain internal control audit services, including data integrity and security, change management, and blockchain governance.
In order for audit firms to address this last challenge, like the five described above, and succeed in this important transition, they must therefore take the lead and invest heavily in technology ownership. This may include hiring new technology skills in data analytics, acquiring blockchain-focused start-ups, and training existing staff to adapt to future challenges.
Furthermore, audit firms must also develop a culture of innovation in all their business units to ensure the evolution of their service offering and adapt to new market needs.