Proper auditing is a key aspect of running any organization. Without auditing, decision makers are left with no insight into whether or not their strategies are proving effective. It’s also useful for attracting investment. Businesses looking to raise capital from investors will prove more successful if they have proof of a quality audit.
These benefits are undeniable, but what is their cost? A proper audit takes highly trained professionals an immense amount of time. And that is dependent on whether or not everything was properly recorded in the first place. If the initial accounting was flawed, billed-hours can increase exponentially. Not to mention that there is also always the opportunity for mistakes by the auditor themselves.
As important as the auditing industry is, it can stand to be improved from its current form. We now have the opportunity to do just that thanks to the advent of blockchain technology.
Blockchains are uniquely suited to the task of improving auditing because they allow for the timestamped recording of data without a trusted third party. Instead of completing a transaction and recording it in a separate ledger, the transaction is the public record. With proper blockchain utilization, organizations are provided with an immutable record of everything that they do. This drastically reduces the risk of human error during the accounting process.
The application of distributed ledgers has the potential to benefit organizational efficiency across the entire global economy. Much like the Internet drastically reduced the cost of transferring information, blockchains will democratize access to accurate accounting procedures. In turn, this will increase overall economic activity. Increased transparency and less risk of human error means that investors can be confident in organizational record keeping. This security means that investors will be more likely to invest capital rather than let it sit idle.
Of course, this transition will not happen overnight. Switching to an auditing system based on the use of blockchains will take a complete overhaul of the way that accounting is currently executed. Large organizations take time to adapt to technological change no matter how beneficial it could be to the bottom line. Other, less trustworthy entities, will balk at the idea of having a ledger that is tamper free.
Nonetheless, the benefits to be had from utilizing blockchains are too great to be ignored. By reducing the costs of doing business thanks to more accurate accounting, transparency, and increased investment, blockchains will revolutionize the way in which the world performs audits.
This is an opinion article by Kenny Spotz. Views expressed in opinion articles do not necessarily reflect the views of BTL.