How Blockchain Will Revolutionize Internal Audits
Blockchain technology is most well-known for its application in cryptocurrency. However, experts agree that its potential goes far beyond bitcoin, Ethereum and their competitors. In fact, as the Harvard Business Review points out, blockchain promises digital transparency capable of protecting any record from “deletion, tampering, and revision.”
That same Harvard report goes on to argue that, in a world managed with blockchain tech, every agreement, process, task, and payment could “have a digital record and signature that could be identified, validated, stored and shared,” rendering middlemen obsolete.
Such systems of management would clearly have a tremendous impact on governance, risk management, compliance, and other important functions currently overseen by audit teams. Anticipating and preparing for these changes is clearly important for any organization that aims to keep its audit processes running smoothly throughout the upcoming decade.
How Blockchains Work
Blockchains can be thought of a decentralized yet highly systematic ledger which can be used to record, verify, and access information of any type — from financial transactions to security metrics, to progress reports, etc.
Information is recorded by pairing a private digital signature (which functions like a password) and a public digital signature (which functions as a virtual ID.) Verification occurs through the computing power of specialized hardware such as nodes and miners, which earn cryptocurrency rewards in exchange for their assistance. This anonymous and decentralized method of verification ensures that information has not been manipulated in any way.
Blockchains and Real-Time Auditing
Blockchain verification is practically instantaneous, a clear advantage over any method reliant upon human input. Such responsiveness could, for example, allow corporations to conduct “real-time” audits in which information was collected and verified as it was reported. It could also undermine many of the most common white collar crime strategies used in corporate fraud, as all financial transactions would be immutably recorded the instant they occurred.
That said, auditors don’t need to worry about losing their jobs to automated audits processes anytime soon. Although blockchain itself is inherently secure, it also leaves certain vulnerabilities to human error that appear best addressed through increased human scrutiny and oversight. For example, the decentralized nature of blockchain management means accidental financial transactions are irreversible, and that there is no authority to report a phishing scam or impersonation fraud too. Lost personal keys can also pose serious and potentially uncorrectable issues.
In short, the fundamental job of auditors will remain the same: evaluate human competency and mitigate risks. However, the specific tasks involved in corporate auditing will likely evolve quickly, requiring auditing teams to be highly adaptive and agile.
Preparing for the promising yet ever-changing future of auditing requires both a willingness to adapt and the tools that will facilitate such adaptation. Visit Audit Prodigy online today to learn more about how our software solutions can help< Back