Will External Audits Vanish in the Blockchain World?

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Nov 02, 2017

On November 2, 2017, the International Federation of Accountants (IFAC) released an article on how external audits won't vanish in the immediate future, but like many of the disruptive transformations taking shape around us with everything going digital, external audits cannot stand insulated.

Blockchain is seen as a solution in every situation where there is need for a trustworthy record. And that is where blockchain’s next big disruption is: its potential application in inter-organizational records, including accounts management.

In a mature blockchain and an artificial intelligence-driven world, investors could—in real-time—have a true and fair view of financials that are inherently trustworthy. This would eliminate the need for external audits in its current form.

Does this really mean external audits would be extinct?

Not really. First, as it stands today, blockchain suffers from lack of clarity in its administrative framework. In addition, the internal controls surrounding origination and creation points for transactions and configuration of smart contracts and mining may always be a cause of internal control concern and need to be audited. 

Transformation of external audit

One can say with some certainty that the external audits in a blockchain-driven world will need to shift focus from transaction based audits to audit of internal control design and change management.

Review the full article on the IFAC's website.

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