Using Blockchain to Automate Financial Verification
According to recent studies, blockchain technology has the potential to revolutionize the financial auditing industry by automating verification procedures. It is anticipated that this invention will lower expenses, boost productivity, and protect data, making audits safer and more efficient.
Permissioned Blockchain Research in Auditing
Sean Cao, an associate professor at the Smith School and the director and co-founder of the Smith AI Initiative for Capital Market Research, oversaw the work. His work focuses on “permissioned blockchains” and how they might be used in audits and financial reporting to ensure safe collaborations without jeopardizing the privacy of client data.
Joint Research Initiatives
In the study “Distributed Ledgers and Secure Multiparty Computation for Financial Reporting and Auditing,” Cao co-authored it with Georgia State University’s Baozhong Yang and Cornell University’s Lin William Cong. Their study explores how blockchain technology can replace manual checks by automating the verification of financial transactions.
Overcoming Auditing Difficulties
The time-consuming nature of transaction verification, together with privacy issues and poor response rates from transaction parties, are some of the main obstacles in auditing. According to the study, these issues can be lessened by a distributed ledger system built on the blockchain that automatically verifies receipts, guaranteeing efficacy and economy.
Adoption Difficulties and Cost Savings
Blockchain might result in huge cost savings—up to 70% for auditing firms, according to Cao—even if it cannot completely replace transactions that require judgment. However, broad acceptance is essential if blockchain technology is to have an international influence on auditing. In order to optimize cooperation and efficiency, the research team has created a mathematical model that aligns the interests of regulators, clients, and auditors.
Blockchain’s Potential in Auditing
Numerous auditing organizations are eager to incorporate blockchain technology into their operations, Cao underlined. His goal is to develop a workable blockchain use case that helps auditing companies. He previously published “Architecture for Auditing Automation and Trust Building in Public Markets,” in the IEEE magazine Computer in 2020. This study expands on that work.
