Blockchain Technology—An Audit and Accounting Awakening

Blockchain technology, one of the biggest technology developments in years, has the potential to transform the accounting and audit (A&A) industry. The potential benefits are numerous, but so are the challenges. Although A&A professionals do not need to be experts in this area, they should be aware of the opportunities and risks associated with widespread implementation of this technology. This article will focus on blockchain basics, benefits, challenges, and potential changes to the A&A industry.

First, let’s define the term, “blockchain.” A blockchain is a continually updated ledger of economic transactions hosted on a peer-to-peer network. A distributed ledger is designed to exist in the cloud, so it can be accessed by all members of the chain and updated subject to a set of agreed-upon rules. Since the ledger is decentralized, no single member can manipulate the chain without the agreement of all other members. A blockchain processes, encrypts, and stores transaction data, allowing members to have one transparent record for every transaction—all in real time. Rather than each member maintaining and reconciling his or her own ledgers, he or she, and all other participants, can instantly access the data.

Accuracy, security, and efficiency are among the most important of the potential benefits of blockchain technology. Increased accuracy is the result of all parties verifying results prior to adding them to the chain. The confirmation process will reduce the need for reconciliations, duplicative ledgers, and disputes over the stated terms of a contract. Security benefits include easy verification of vendors and transaction documents from a single set of immutable records. Efficiencies are gained through real-time fund exchange and continuous updating of information, eliminating the need for intermediaries in most transactions.

However, the challenges facing implementation are worrisome. For instance, even the basic setup of a blockchain requires all members to join simultaneously when the ledger is implemented. Joining the chain entails halting the recording of all transactions during the period when members are added, which can prove difficult. The perceptions and general lack of knowledge about blockchain are also slowing widespread adoption. Compliance personnel are not yet comfortable with the related control structures to provide assurance that controls will operate effectively and leave an auditable trail.

Accounting professionals would be some of the first to realize the benefits of implementing blockchain. The time saved from reconciliations alone would significantly reduce expenses and afford time for activities of higher value. Auditors could rely more heavily on transaction data since it is recorded in real-time and cannot be altered once approved by all parties. Payables and receivables would be updated instantly, leading to time and efficiency benefits. The scope of, and expenses related to, audits should also be reduced.

The A&A industry would be well-served to establish itself on the forefront of blockchain governance. Being aware of the many benefits and challenges ahead is critical to preparing for the future. The financial opportunities would be plentiful for those who are prepared to take advantage of them.

If you would like more information about blockchain, or would like to request a speaker on this topic for your organization or event, contact one of our PYA executives below, (800) 270-9629.


Mike Shamblin

Mike Shamblin

Managing Principal of Audit & Assurance Services

Matt Stuart

Matt Stuart

Principal

Related Posts
PYA is pleased to announce the promotions of Michael Ramey, Matt Stuart, and Jeff Pate to the level of Equity Principal. PYA has announced the promotion of Senior Manager Michael...
Read More

PYA Announces Three New Equity Principals

A Section 83(b) election could be one of the biggest tax-saving decisions for taxpayers who receive equity subject to vesting. It is common for start-up founders and key employees to...
Read More

83(b) Election for Start-Up Founders

In today’s business environment, cloud computing arrangements play a key role in the day-to-day operations of companies large and small. The Financial Accounting Standards Board’s (FASB) Accounting Standards Update (ASU)...
Read More

Clearing Up Cloud Computing Accounting

An on-demand webinar, presented by Mike Shamblin, CPA, and brought to you by PYA, helps lay the foundation for the new revenue recognition standard.  The webinar guides healthcare providers of...
Read More

PYA On-Demand Webinar Outlines the New Revenue Recognition Standard in Preparation for Implementation

Qualified conservation easements are becoming an increasingly popular way to save on your tax bill, but what exactly is a conservation easement, and what do you need to know to...
Read More

Conservation Easements: Save the Land, Save Your Money

In the wake of this year’s devastating hurricane season, the President signed into law the “Disaster Tax Relief and Airport and Airway Extension Act of 2017” (the Act). This law...
Read More

Individual Tax Relief for Disaster Areas

PYA Senior Manager Valerie Rock authored an article, “New Payment Review Strategies: What to Do If You Receive an Outlier Coding Notice,” which was recently published in Medical Economics magazine....
Read More

“New Payment Review Strategies: What to Do If You Receive an Outlier Coding Notice”

Guidance on accounting for share-based payment awards is clear...unless it isn't. The Financial Accounting Standards Board (FASB) offered advisement on this very topic in its Accounting Standards Codification (ASC), Compensation—Stock...
Read More

Share-Based Payment Awards: An Update on Modification Accounting

The growing popularity of companies like Airbnb and Vacation Rentals By Owner (VRBO), has many Americans considering renting out their homes, or even specific rooms in their homes,  in hopes...
Read More

Tax Rules to Know When Renting Your Home

Share This Insight

If you received value from this article, please share it with your network (e.g., Facebook, Twitter, LinkedIn). Icons below for your convenience.

Stay Current

* indicates required
Monthly eNewsletters
See more newsletter and alert options.

PYA Population Health Ascend

PYA Healthcare Blog

PYA Thought Leadership Services

The Healthcare Loop