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4 new opportunities blockchain could create for auditors

Blockchain 2In case you haven’t heard, blockchain technology has the potential to change the auditing profession. A new whitepaper co-authored by the American Institute of CPAs details what opportunities could emerge for auditors.

Not sure what blockchain is? Don’t worry, you’re not alone. It’s a digital, distributed ledger that contains every transaction since its creation. Once transactions are entered, they can’t be changed or deleted. Every user on a blockchain has an identical version of the ledger, and all copies are updated automatically when a new transaction occurs. Each entry refers back to the previous entry across all versions, creating a “chain” of information.

What does this mean for auditors? In an earlier blog, we talked about how the work auditors do every day may change. The AICPA’s new whitepaper goes further. It explains how blockchain technology could both evolve audit and assurance practices and create totally new opportunities. Specifically, the paper identifies 4 new jobs that we might see in a blockchain ecosystem:

  1. Auditor of smart contracts

One intriguing capability of blockchain technology lies in smart contracts. This capability allows for a computer program to digitally transfer assets between parties once pre-specified conditions are met. However, users of such smart contracts will still want assurance that the contracts are implemented with the correct business logic. This is where the CPA comes in. Additionally, CPAs could verify the interface between smart contracts and external data sources.

  1. Services auditor of consortium blockchains

As the technology becomes more mainstream, businesses will likely develop blockchain platforms that other organizations can use for their own purposes. Before subscribing to one of these platforms, though, organizations will want independent assurance as to the stability and robustness of the blockchain’s architecture. Thus, the blockchain business may choose to engage a CPA to provide assurance as to the effectiveness of controls over a private blockchain.

  1. Blockchain administrator

For private blockchains, organizations may want an independent party – such as a CPA – to perform the functions of a central access-granting administrator. CPAs could validate the enforcement and monitoring of a blockchain’s protocols. If one of the blockchain’s users were to perform these functions, that individual might have an undue advantage over the blockchain’s other participants. Having an independent auditor serve in this role creates greater trust for the blockchain’s users.

  1. Arbitrator

While blockchain technology can execute contracts, people still determine those contracts’ terms. This means there is room for error. In a world with blockchain, CPAs may be able to serve as an arbitrator in those cases when the spirit of a smart contract departs from a legal document, contractual agreement or letter.

As the CPA’s role evolves in the blockchain ecosystem, standards and education have to evolve as well. These new opportunities raise questions that the profession must consider, such as:

  • What types of skill sets does the profession need to remain relevant?
  • When providing assurance across a blockchain, who is the client?
  • How would a CPA assurance provider assess engagement risk for an autonomous system?
  • How would independence rules apply to users of a blockchain?

As the technology gains wider acceptance and new applications become apparent, the AICPA’s Assurance Services Executive Committee, working with other AICPA committees, will be at the forefront identifying answers.

To learn more now, check out the webcast Blockchain Technology – Impact on the Accounting and Finance Profession, airing March 26.

Lindsay N. Patterson, CAE, Senior Manager, Communications and Public Relations, Association of International Certified Professional Accountants 

Blockchain courtesy of Shutterstock.


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