Blockchain technology is not only changing the way financial transactions and information are recorded, processed and stored, but also the way audit firms work. The purpose of this paper is to explore how blockchain technology affects the smart contract auditing industry. This study conducted a qualitative study with a sample of 17 accountants. The findings indicate that there are six significant ways in which this technology might impact accounting businesses. Blockchain technology will give audit the teacher brings the following conveniences:
(1) Save time and improve audit efficiency
(2) Encourage audits that cover the complete sample rather than audits that only use sampling methods.
(3) Focus the audit on internal control tests rather than transactional substantive tests
(4) Establish a continuous audit process
(5) Play a more strategic audit role
(6) Develop new consulting services
The citation of blockchain technology underscores the need for a clear and coherent system and new auditing standards for audit work, enabling auditors to use the technology flexibly and enhance audit work.
Keywords: blockchain technology, audit, audit process, innovation, digital technology
JEL code: M42
Background
Blockchain technology, like other new digital technologies (robotics, big data, analytics, artificial intelligence, etc.), has not only changed the way companies conduct business, but also the way information is processed and communicated between different stakeholders . This technology originated in Crypto (primarily Bitcoin) and is today considered one of the most powerful new technologies after internet technology.
Of course, these developments will also have an impact on the auditing sector. In fact, blockchain technology has the potential to radically alter how audit companies operate as well as how they create and grow their businesses.
Blockchain technology has the ability to open up new service development options for the audit sector as well as transform current services that may eventually be replaced entirely or in part by technical solutions (Appelbaum et al., 2017).
Realizing the huge potential of blockchain technology, audit firms invest over $3 billion annually in this technology (Smith, 2018). For example, in 2017, Ernst & Young (EY) began accepting bitcoin advisory services, and as the first company to accept bitcoin advisory services, it invested in developing applications and services to promote the use of blockchain technology in its applications in business.
KPMG, in collaboration with its partner Microsoft, has launched a new blockchain technology-based service to help companies implement business process optimization (KPMG, 2017). Deloitte created its first blockchain technology lab in 2016. PricewaterhouseCoopers launched a digital asset service in 2016 using blockchain technology.
As with other new technologies, there are some challenges and opportunities presented by blockchain technology that auditors need to be aware of. Their majors may be replaced by other companies working on new technologies. In fact, companies must enhance their flexibility and ability to integrate innovation in uncertain environments, which will be the only way to remain competitive and meet future challenges. (Ayerbe et al., 2020; Dupont, 2019).
At the same time, blockchain technology involves IT risks, namely unauthorized access and threats to identity, which may also have an impact on traditional audit processes and business development. According to Alles (2015), the acceptance of advanced technologies and blockchain by audit clients will be a catalyst for auditors to adopt these technologies.
Blockchain technology, combined with other digital technologies, can transform the auditing process by modifying the way auditors access data, collect evidence, and analyze data (Rozario, Thomas, 2019). Auditors have no choice but to integrate these technologies, change their organizations and processes, and risk losing legitimacy in the audit market.
Recognizing these risks, the Big Four accounting firms (Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers) are working with 20 Taiwanese banks on a joint pilot project aimed at offering new accounting services. The purpose of this collaboration is to test a new blockchain platform that allows auditors to directly verify and confirm transaction evidence and facilitate the examination of external receivables, a burdensome auditing task (Zhou, 2018).
More specifically, audit firms no longer evaluate audit evidence manually, as transaction information is easily accessible through blockchain technology tracking and verification, saving audit firms a lot of time.
Few studies have attempted to comprehend the effects of blockchain technology on the audit business in this regard (Smith, 2018; Liu et al., 2019). Most studies focus on other digital technologies such as big data, analytics, and artificial intelligence, ignoring the impact of blockchain technology on the audit industry (Manita et al., 2020).
Blockchain technology presents some of its own characteristics that distinguish it from other technologies. The information on the blockchain is encrypted, validated, and confirmed by every user. Therefore, it should have a different impact on occupations.
Smith (2018) reviewed existing research on blockchain technology in the accounting field, discussing the benefits and challenges this technology may bring to the accounting profession. He pointed to a range of potential impacts of the technology on the accounting profession. In particular, he came to the conclusion that blockchain will free up auditors' time from repetitive duties like amount confirmation and verification so they can concentrate on more high-level activities like creating preventative tests and doing intelligent data analysis.
Liu et al. (2019) attempted to discuss the opportunities and challenges that two blockchains (public and consortium) may bring to internal and external players. Their research culminates in a series of recommendations for professionals to adapt to the technology and grow their businesses.
Desplebin et al. (2018) use a forward-looking approach to explore how this technology could transform the accounting and auditing profession. Their research summarizes a range of possible scenarios that reflect the evolution of the accounting profession in terms of data security, dematerialized transactions, reconciliation, and a fair image of accounting information.
This research is still theoretical and not based on empirical research, and several studies have attempted to explain this technique (Carlozo, 2017). Other studies have either synthesized articles on this topic or forward-thinking the impact this technology may have on the accounting profession (Liu et al., 2019; Smith, 2018). The reasons for this choice may be the difficulty of obtaining information and the fact that most companies do not use this technology.
Audit firms (especially the Big Four) are investing heavily in developing the technology and acquiring new tools and controls developed through its strengths. Therefore, in-depth study of the impact of this technology on audit activities, it is necessary to conduct a site visit. In this context, this study aims to examine the possible impact of blockchain technology on careers, smart contract audit processes, and business development processes.
This research is beneficial for both auditors and blockchain technology. On a theoretical level, the literature on the impact of blockchain technology in the field of auditing can be enriched by explaining how blockchain technology will change the profession of auditors and the new challenges it faces. At the management level, this research can enlighten not only professional auditors about the possible evolutionary paths of their audit processes, services, and development of new business opportunities, but also the technical and organizational challenges they will face.
