Blockchain will transform the role for audit
EY’s assurance head highlights the potential of Blockchain technology to revolutionise financial reporting and audit.
“Blockchain will do to corporate reporting and financial transactions, what the internet did for knowledge. It could fundamentally change the role of the finance function and has huge implications for us as auditors,” according to Hywel Ball, EY’s UK head of assurance.
Ball was commenting on a new government report about the use of blockchain, ‘Distributed Ledger Technology: beyond block chain'. He added: “This new technology has the potential to transform the speed of corporate reporting. Blockchain will theoretically allow transactions to be recorded and logged in real time, helping to provide greater transparency and trust in a company’s financial accounts. It could allow a company to publish their ‘annual’ results on an almost daily basis.”
The government report provides a detailed look at the opportunities and challenges of using distributed ledgers, which are essentially shared asset databases that can be used to keep track of who owns a financial, physical or electronic asset across a network of multiple sites, geographies or institutions. Blockchain is the underlying technology which was invented to create the peer-to-peer digital cash Bitcoin in 2008. Block chain algorithms enable Bitcoin transactions to be aggregated in ‘blocks’ and these are added to a ‘chain’ of existing blocks using a cryptographic signature.
Block chain technology can be used to maintain a complete record of transactions and balances historically for the purpose of simplifying regulatory record keeping, transaction reporting and audit. EY’s Ball said: “Data and technology has fundamental implications for all businesses including our own. For example the accounting profession may ultimately need to provide assurance over the algorithms that underpin the blockchain technology and allow distributed ledgers.”
He added: “I also agree with the report that the UK is in a unique position to explore these opportunities and challenges. The key components of blockchain ecosystem – technology, finance, capital markets, innovative accounting, and progressive regulation – already work together in close proximity here in London. However we need to ensure that this isn’t just seen as a bitcoin or financial services issue. Blockchain could radically change business models and business functions, such as procurement.”