The emergence of blockchain technology into the industry is being carefully monitored by the AICPA so the national organization can guide professionals on how this breakthrough platform may impact their job duties, career skills and the profession overall. The following article is an interview discussion between the What-Counts Editor and Ami Beers, CPA, CGMA, Director of Assurance & Advisory Services, and Corporate Reporting for the AICPA. (What-Counts also thanks Lindsay Patterson, Senior Manager for Communications and Public Relations at the AICPA for her assistance for this article.)
Blockchain & the Changing Role for the CPA
What-Counts: First off, let’s discuss the guidance materials the AICPA has issued to professionals through blockchain power points that guide CPAs on how their job may change with this digital ledger technology. One of the core things accountants do is examine statements to ensure accuracy. If the technology, by its very structure, ensures the accuracy of the ledger, can you explain how a typical CPA would then work with the ledger to validate the data that’s been input there?
Ami: An auditor needs to assess that recorded transactions are supported by sufficient and appropriate audit evidence. If the data is coming from a blockchain, an auditor needs to be able to rely on that blockchain’s data to determine whether the data may be sufficient and appropriate. Therefore, auditors will need to gain comfort over a blockchain’s consensus algorithm and conduct a risk assessment over the IT security environment.
Financial Statements & Blockchain
What-Counts: The basic “toolbox” of financial statements most CPAs work with include working with a balance sheet, profit and loss statement, dividend income/investment earnings statements and many other financial reports. If the blockchain will reflect all these intersecting reports on this central ledger, can you comment on how that would help the CPA’s job, how will it enhance that?
Ami: The transparency aspects of blockchain technology allow the auditor to be able to access information for all transactions. Therefore, the audit could be transformed from a retrospective perspective to real time where the auditor will be able to access the information automatically, as it occurs, without the need to obtain this information from the client or an outside party (i.e., a bank).
Auditors, Blockchain, and the Evolving Specialty of Blockchain Administrator
What-Counts: The AICPA put out a white paper on how the auditor’s role could be transformed by blockchain. The creation of a shared ledger that allows for continual real time updates, no alteration of data, and the permanent storage of previous entries would seem to be a platform that would enhance the ability of an auditor to perform speedy and efficient oversight. Can you expand on how the AICPA views the role of the auditor in blockchain?
Ami: There are many areas that will require new functions for auditors related to blockchain. The whitepaper provided a few ideas as to how auditors will serve companies related to blockchain. Any auditor whose client is transacting in cryptoassets will need to deal with the blockchain as a component of their traditional audit. However, because public blockchains retain a freely viewable record of all transactions on its network, auditors may not have to perform substantive confirmation testing. As companies begin to transact on private (consortium) blockchains, there may be more opportunities for auditors in terms of providing independent assurances over the stability and security of a permissioned blockchain’s architecture and design. This would involve an evaluation of how general IT controls are implemented and designed to provide protection over sensitive, private information and the processing controls over processing integrity, availability, and security. In addition, a potential role could be as the auditor of the component pieces of the blockchain such as smart contracts and oracles. This new role would involve providing a trusted 3rd party verification that the smart contract is operating as intended by the parties.
Growing Investment in Blockchain
What-Counts: Industry reports say E&Y, Deloitte, KPMG and PwC are expected to invest roughly $400 million collectively in 2019 on blockchain related platform development and products. Reports further say all are accepting bitcoin as a payment method; PwC has set up a blockchain auditing service; and KPMG has developed digital ledger services, so it’s clear the technology is becoming mainstreamed at the largest firm levels. Since it’s taking hold at the larger firm level, in your view, how fast will this filter down to mid-sized firms and further down to the independent practitioner?
Ami: We have seen smaller audit firms involved in this area because their clients are getting involved. Currently, the work is related to cryptoassets and auditors are having to deal with this in their traditional audits.
Is there a future for the CPA?
What-Counts: There’s been a lot of worry from some quarters that “blockchain will make the accountant’s job obsolete”, but most industry observers say that’s not true!! How do you see it?
Ami: I believe that there is more work for auditors in the future as companies adopt blockchain. The auditor’s role will change however, and new skills and knowledge will be necessary. CPAs should become educated in this area. The AICPA has many resources available to educate CPAs on blockchain technology, and now has a new Blockchain Fundamentals for Accounting and Finance Professionals Certificate, which provides a comprehensive program on the basics of blockchain technology concepts and explains the benefits and risks associated with this new technology.