Blockchain: what does it mean for audit and assurance?

May 01, 2018
The potential for real-time audit with instant access to a secure ‘golden copy’ of data is an exciting prospect, but this vision might be closer to reality than you think.

We’ve come a long way from the days when audit was a few words of confirmation from the auditor. It has evolved into millions of data transactions and increasingly complex analysis. More than ever, stakeholders are calling for audit to give them confidence in an unpredictable world. The following question is therefore often asked: how do we continue to develop audit and provide assurance to stakeholders as they look ahead and seek to make informed decisions about the future?

Emerging technology is playing an increasingly important role in all aspects of our lives – both personal and professional. We already see investment in automation to make the process faster, to deliver higher quality and to give greater insight. Access to, and efficient use of, the data remains key – but where are we going next?

Blockchain is a decentralised ledger, or list, of all transactions across a peer-to-peer network. While cryptocurrencies like bitcoin gather headlines, in part because of their volatility, perhaps of greater interest right now is the underlying blockchain technology. This interest is driven by how securely the blockchain can record transactions in a ledger.

Blockchain provides an unchangeable record of transactions by using these decentralised digital ledgers, and can replace processes where transactions need to be verified by a third party. So to the extent it’s used to verify the accuracy of a company’s financial transactions, it can handle part of an auditors’ job.

A blockchain solution can bring focus to the automation of audit checks by providing real-time transparency and assurance. PwC recently partnered with global asset management company, Northern Trust, to launch a new blockchain-based auditing system. The platform will enable audit firms to access fund data stored on a private equity blockchain in order to audit specific events in real time. 

Audit firms can now have their own blockchain node, and use it to manage access to relevant fund data that enables real-time audit-capabilities. This is designed to provide auditors with instant access to a secure ‘golden copy’ of private equity lifecycle events. The ultimate goal is to improve the efficiency of the auditing process by making the underlying transactions more transparent to audit firms.

This vision might be closer than you think. We are working with our clients to understand what’s real, what’s hype, and how to lay the groundwork today. With 62% of finance executives in organisations making significant investments in artificial intelligence over the next three years, and 13% of that investment slated to be in blockchain, expect more innovation to accompany such emerging technologies.

Ronan Fitzpatrick is the Director of Digital & FinTech at PwC.