Audit Implications of AI & Blockchain

Abstract

Some of the most high profile work that has taken place, especially as it pertains to the accounting subset of the financial services landscape, is the work that has taken place linked to audit and attestation work. The audit process, as currently constituted, is an almost perfect fit for the increased efficiency and automation provided for by a variety of blockchain tools. Audits, and these similarities tend to exist across geographic and firm lines, tend to contain several of the same core components. An engagement letter is composed, outlining the services to be provided by the external audit organization, including but not limited to the testing of certain assets, verification of financial statement amounts, and then the issuance of an opinion based on these amounts. Even with these tests and analyses, some of which may be quite sophisticated in nature, there is a fundamental time lag issue that usually remains unaddressed despite how efficient the audit process is. Put simply, the amount of time that passes between when the data is actually generated or produced, and the time that the audit actually occurs can stretch into months. Even with interim work, or work performed at different times during the year, there is still often a substantial lag between when data (and potential errors) happen, and when that data and potential errors are reported to management. The figure below represents areas in a financial transaction (trading) in which potential audit and attestation implications will arise, and can be aided by the implementation of emerging technologies (Fig. 13.1).