Building Blocks of Modern Accounting: Internal Auditing and Artificial Intelligence

Building Blocks of Modern Accounting: Internal Auditing and Artificial Intelligence

Transactions are the most vital part of every business, it is the focal point of every communication whether it is concerning business to customer exchange or business to business trade. Trades mean investments, and investments mean business decisions. In corporate relations, business leaders want assurance that a transaction is cross-checked, well accounted, and original. This may mean handling unique personal details such as financial information, proof of purchases, legal documents and the like, which only happens following a business presentation that has communicated trustworthiness during the process. In a traditional workflow of exchange, transaction happens only after trust building which includes exchanging significant documents that assure both parties of its entire uniqueness. However, in this generation of continuously developing technology, how can assurance be digitized? Nowadays, we call it the “blockchain”.

As defined by Investopedia, “A blockchain is a digitized, decentralized, public ledger of all cryptocurrency transactions” – this means this digital ledger technology has no specific owner as it has been publicly distributed in a wide access of computers, and the possibility of tampering is almost impossible as these information may be viewed by everyone at any given time. It is a constantly growing list of digital currency transaction records that a computer connected to the network may download.

The potential of blockchains has questioned the role of accountants in the constantly changing technological requirements of businesses that seek to improve strategic movements and lessen human resources which are more likely prone to commit errors unlike programmable applications that have been customized to their use, however, despite of these underlying problems, companies have started testing its benefits to maximize its optimistic output. As an effective leader, aside being on top of all digital improvements, it is also necessary to become aware how to make these digital transactions become safer and legitimate as being computerized won’t mean a perfect solution, but just another form of assurance. Therefore, putting accountants out of the picture will create an imbalance in the nature of accounting.

Re-organizing key functions in accountancy may combine the best of both worlds in creating a seamless growing directory of sensitive information, this means the integration of blockchain based trading may run well with a round the clock internal audit team, in a study featured by PwC (PricewaterhouseCoopers), “Management creates a set of processes and controls to provide comfort that the records are accurate. IA then tests to see if the systems work and that the data confirms what was recorded. Additionally, the auditors work with management to help improve processes and controls. Finally, the company undergoes an external audit. Once this is done, stakeholders have reasonable assurance that the reporting can be relied upon.” Setting up or outsourcing a team of specialists in accounting may patch the underlying challenges of system malfunctions whenever the business software updates or an unintended network error occurs.

In addition from the study, to address potential concerns from the blockchain, internal auditors may seek a neutral independent party that draws knowledge in the IT industry, recent technological developments, and has a background in client research, as they may help in the creation of testing a designed approach and gathering data by research.

In a quote by Alex Shelkovnikov, a corporate venturing and blockchain lead at Deloitte UK, in an article at economia, “With blockchain technology that validation could be provided independently, potentially by an independent network validating transactions that have been recorded on the blockchain. The role of audit could move further up in the value chain, into providing more of a governance role around the various types of blockchains that are going to be used”.

Like most forms of technological improvements, blockchain reduces potential errors when collating multiple information coming from multiple sources, however it doesn’t guarantee eradication of miscalculations as potential system applications may still face glitches in its codes, but one is for sure for all business leaders: Blockchain and Internal Auditing is a tight business strategy in securing digital information and investments.

Do you have a game plan set including blockchain? Infinit-O is built on a four-part operations capability framework that will suit your total business needs: People, Process, Technology, and Security, with the aim to empower small to medium sized businesses across all industries. To find out more about the latest finance strategies, contact us here today!

Written by Infinit Accounting

Infinit Accounting’s content team consists of finance professionals and experts who regularly contributes articles related to the finance and accounting and outsourcing industry.

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