Blockchain : A Evolution, Not Revolution
Introduction : Blockchain is the new buzzword in virtually every industry banking, investing, healthcare, education, insurance, real estate, government, travel, etc.
While it is best known for its underpinning of the cryptocurrency phenomenon, the technology itself has far wider applications, and industries are poised to incorporate it into their business processes. It provides an incorruptible ledger of identities, transactions, documents, assets, etc., and thus offers a new way to record, store, and share data of all kinds.
For the entire buzz around blockchain and its transformative potential for the profession, accountants should bear in mind that its an evolution, not a revolution. Blockchain is not a threat to accounting, but it is an opportunity to have something new and better that could change the working of Industry.
Blockchain : A Evolution, Not Revolution
Transforming the infrastructure
We are still at the early stages of the adoption of blockchain technology but it is becoming increasingly clear that it is transforming the infrastructure that underpins financial services and other industries. For the accounting profession, the impact could be particularly fundamental, with blockchain finally superseding a system of financial governance and control thats been around for the best part of 2,000 years: double-entry bookkeeping.
Blockchain provides an immutable and transparent record of all accountancy-based data, it offers an opportunity for accountants and Chartered Accountant firms to streamline their processes and audits, while ensuring that the records are accurate and truthful. This is an amazing improvement over traditional accountancy procedures that can be fraught with errors and fraud.
The Institute of Chartered Accountants of India (ICAI) has announced its plans to re-skill around 1.20 Lakh of its members in various technologies such as Data Analytics, Artificial Intelligence and Blockchain. This is indeed a praiseworthy move by the institute. ICAI believes that Blockchain has the potential to impact auditing and accounting greatly and the members need to be prepared for these emerging trends.
Blockchain impact on Auditing and Assurance services
It is being believed that Blockchain will render auditing redundant, but it is far from the truth. On the contrary, Blockchain is all set to increase the responsibility of auditors. Certain tasks will surely be eliminated in the process and the role of an auditor will evolve in the Blockchain ecosystem. For the tasks that will be automated, auditors will still have to use their professional judgment and scrutinize the estimates. They will also need to evaluate internal controls to test the authenticity of the data. In a nutshell, Blockchain will change the way auditors operate, it will enhance the quality of the audit, but the objective of an auditors job will continue to be relevant.
Blockchain ecosystem not only has the power to transform the existing audit process but also to create new roles for auditors in the future. Some of these will be:
1. Checking Smart Contracts: Blockchain is based on smart contracts which are used for automating business processes. However, it needs to be ascertained that these contracts are used with proper business logic, and auditors should apply their due-diligence at each stage to track errors and anomalies.
2. Testing Blockchain system: Each new Blockchain platform that will be subscribed to or used will require testing of the application in terms of stability and execution. Now users would want to involve auditors as a third-party for Integrated Test facility.
3. Vetting the legal and administrative aspects: A Blockchain application has to comply with certain legal, ethical and administrative standards. It would be immensely beneficial if an independent third-party, such as an auditor, vets its functionalities.
It is a Potential Road Ahead
Blockchain technology is already disrupting a number of industries, and it is here to stay. Though in its infancy, its applications will only continue to increase. But will it make accountants irrelevant No, but it will change the way in which accountants do their work much like computers have continued to change the ways in which everyone does work. So, we should embrace this new technology and promote it to clients and potential employers.