Even though the accounting business is in constant change thanks to many innovations like chatbots, 2017 is very likely to become the year when accounting made the next significant step in its evolution. In January 2017, Deloitte, which is rapidly becoming a true leader in the development of blockchain accounting, announced that the technology had passed professional audit and assurance standards. In other words, the very first blockchain audit was completed with success. So from now on it is only a matter of time before blockchain will become an integral part of accounting.
What Does This Mean for Accounting?
Like we said, this could mean that accounting has entered into a next phase, where the work of auditors as we know it might come to an end. In a previous article we have already discussed why this is very likely: blockchain is a public, decentralized, distributed (peer-to-peer) ledger where transactions, which can only be seen by those who start the process, are confirmed and cryptographically sealed the moment they enter into the system. Since everything happens automatically, auditors, who will still be needed in the future, can become liaisons, guardians of ongoing transactions, or testers of systems based on blockchain. But most importantly, the cost and time necessary for conducting an audit will be drastically reduced.
The Beginning of a New Accounting Story
Even though Deloitte’s achievements are already impressive, we are still far away from creating a giant joint register for all accounting entries. However, the technology can already be used with the current accountant techniques. One such application is securing the integrity of records, which was basically used for Deloitte’s auditing process we briefly mentioned before. The process starts when the parties create a so-called hash string, a digital fingerprint of a file which can be simply time stamped by writing it into the blockchain via a regular transaction. This is where auditing comes into the picture: the auditor just has to search for the hash string in the blockchain, and if the data on both documents match, the original document was uncompromised and unaltered, ergo true.
Another, almost sci-fi like feature blockchain sports is smart contracting. We also emphasized the importance of automating as much as possible, especially (recurring) invoices, but with blockchain this can be automated even further. In fact, the invoice can “pay itself” once verified that the delivered goods/services have been received by the client in accordance with the agreed conditions.