There is no doubt that Blockchain is evolving, right now hundreds of ICOs are currently vying for your investment ready to launch that great new project.
But to find the best thing since Bitcoin, you need to look at why Blockchain was created in the first place—for transparency and accountability. Two ideals which go hand in hand with the auditing world but up until now have rarely been used.
For businesses, an annual audit can be costly but necessary. It assures communication with stakeholders and presents a snapshot of how that company is doing. But in today’s continually evaluating and fast-paced world, is a snapshot really good enough?
That’s where real-time reporting, and Blockchain, comes into play.
An army of auditors
Enter Auditchain, a project that could be summed up as the culmination of dreams for those who remember the original Satoshi Nakamoto whitepaper on Bitcoin.
This brave new world is staffed by industry legends such as Chief Scientist Dr. Stuart Haber – who’s work in cryptographic time-stamping Nakamoto referenced, Eric Cohen, a pioneer in audit technology, co-inventor of global reporting taxonomy standard xBRL and fellow at the Continuous Auditing and Reporting lab at Rutgers University and Jason Meyers, a 30-year veteran investment banker who pioneered the first multi-jurisdictional stock plan administration platform that landed Facebook as a client.
Imagine, an army of auditors externally validating each enterprise transaction data set in each block and recording the level of attestation to a blockchain. It would then be presented in the form of audit analytics through a block explorer. In this case, it’s the DCARPE(TM) Explorer. Auditors validate accuracy, accounting, and reporting compliance while earning AUDT tokens themselves. For those looking to gain insight such as institutional investors and analysts, they are able to purchase a subscription to granulated enterprise data such as “rollups” to the financial statements, and for an additional cost more detailed analysis would also be made available.
Mind blown yet? It should be. Finally, investors and stakeholders would be able to understand exactly how a business is operating while lowering the ability to commit fraud to almost zero levels. Take this one step further into a government department, and suddenly we have real accountability for how taxes are spent, incomes are distributed, and campaigns are run. And all of this happens in real-time on a continuous basis.
This could be life-changing for our world as we know it, financially and politically.
The age of zero fraud
Right now, fraud is committed through human calculability and collusion, with the Financial Reporting Council’s (FRC’s) latest Audit Quality Review (AQR) identifying a huge fall in audit quality across the big 4. In the UK, KPMG’s lack of interference with government contract holder Carillion has been slammed, whereas only this month EY announced they would be upping the costs of its audits to cover increasing costs of research and technology innovations.
But what if we could all but eliminate fraud using the blockchain? Where each piece of financial information is laid down and then integrated with millions of other facts about that company. Each new block on the blockchain provides updated information on the balance sheet, cash flow, income statement, and changes in stockholders’ equity reports. You change one, and you change them all.
Potentially neutral costs
Now we jump to the cost involved. Auditchain would be run on its own Blockchain using its own token; AUDT. Here, the cost of assurance services is valued in local currencies. However, unlike typical audits, companies would be free to choose one or any number of assurance providers on the network pursuant to one of a library of engagement protocols. It’s similar to the Bitcoin or Ethereum Blockchains where creating a transaction ensures validation by a volunteer army of fact-checkers. The difference; its an army of CPAs and/or chartered accountants included in the engagement that externally validates data sets.
Furthermore, the enterprises under audit can also spin up nodes and contribute back to the network, theoretically reducing the cost of an audit and financial reporting to zero.
Auditchain finds itself in a remarkable position. It currently possesses the technology to not only cut down on fraud and present real-time accounts reporting, but despite the initial token investment, it could also make the accounting process cost neutral.
Changing the world
The real question is not how has Auditchain got here, but why has it taken so long?
It was certainly in the minds of Dr. Stuart Haber and Dr. Scott Stornetta when they wrote their 1991 paper “How to Time Stamp a Digital Document,” which is referenced several times in the Satoshi whitepaper. Suddenly, an allegiance between blockchain and auditing seems possible.
Through its Decentralized Continuous Audit and Reporting Protocol EcosystemTM—DCARPE(TM), Auditchain will create a payment and utility token-based system for its network. The coalition of members of the accounting, audit and financial reporting community known as the DCARPE(TM) Alliance are planning their first meeting which will likely take place this October in Switzerland where Auditchain will submit their own financial statements, in real-time, on the network.
Right now Auditchain is currently conducting a private sale of the AUDT token with their Token Generation Event due sometime in the next 2-months.
The auditing world awaits with baited breath.