ThinkTWENTY20

Blockchain is often touted as the answer in terms of internal control and audits, although some of the errors in this view have been addressed in numerous publications including his one. However, there are risks with blockchain and in view of the hype that has surrounded it, it is important that the risks be explored.

A major aspect of blockchain is that while it can provide an element of assurance about the accuracy of recorded transactions, it cannot deal with the need to reconcile the records with the physical assets. There are tools to help with this, but blockchain cannot do it alone.

Any auditor will immediately recognize that the need to agree physical assets to recorded ones is one of the most important elements of an audit. So people, including auditors, still need to verify the existence and condition of the assets.

There is a risk that might be called blockchain risk which arises in situations where blockchain is in place but people assume because of the hype that controls are all looked after when in fact they are not. At a superficial level, this is obvious to professional accountants but it always requires analysis to define the risks clearly.

It’s a situation rife with dangerous implications. Accountants work with client data all the time. And they also store a lot of data about their clients such as contact information and government identifier information. This takes place at a time when viruses and various forms of cybercrime are increasing exponentially. It leaves accountants in a vulnerable position if they do not take the steps necessary to protect their client data.

There are two problems that the accounting profession has had for many years. One is that we downplay the importance of technology and do not include good technology training in the educational programs. That is increasingly untenable. The other somewhat related issue is that we educate young accountants in the advanced elements of management, strategy and professional work, but when they gain employment, they are assigned the basic, routine, (let’s face it, dull) tasks.