Blockchain technology could benefit the auditing industry

The adoption of blockchain in financial audits is the focus of recent research by Sean Kao, professor and co-founder of the Smith AI Initiative for Smith AI Capital Survey at the University of Maryland’s Robert H. Smith Business School. . “Many audit companies want to use blockchain and apply technology,” he says. “We wanted to build a blockchain use case that would help auditing companies.”

The study, published recently in Management Science, in “Secured Multi-Party Computations for Ledgers and Financial Reporting and Auditing,” states that “permitted blockchains disrupt traditional financial reporting and auditing processes, and clients We will look at ways to enable collaboration without sacrificing data privacy.”

Co-authored with Lynn William Kong of Cornell University and Bazon Yang of Georgia State University, the paper states that “unbiased financial reporting is important in financial markets.” The audit team must review the transaction to ensure that the financial statements are correct. CAOs say the difficulty of this is time-consuming and transaction partners don’t want to reveal information due to privacy concerns, and often have low response rates from transaction partners.

“It’s labor intensive and you can’t check every receipt,” says Cao. “We need to do a random sample. But there’s an error because it’s really random.”

CAO addresses these issues by using blockchain-based distributed ledgers to automatically verify all receipts in an efficient and cost-effective way for paper developed systems to It says it will help you do. Additionally, it provides enhanced privacy protection when sharing information between different auditors or clients.

“What’s not replaced is when the transaction requires discretion,” adds the CAO, but overall, says that it’s a 70% cost saving for audit companies to adopt this approach.

The CAO has built a mathematical model to model auditors, clients and regulatory incentives, as global adoption of this process is necessary for impact.

“We are trying to maximize the unity of the three parties,” he says.

The CAO previously published research into the design of prototype systems in the 2020 IEEE Publications Computer “Architecture for Automation and Credit Building in the Open Market.” Han of Kennesaw State University and Qixuan Hou of Georgia Tech.

CAOs continue to conduct further research in this field and continue to influence and influence the industry.