Auditing the Blockchain

What is the Blockchain?

The blockchain is a peer-to-peer system of records used to transact value, not limited to money, without the need for trusted intermediaries like banks or brokers (Singhal, Dhameja, & Panda, 2018). It is a shared, replicated, and permissioned ledger that offers features such as consensus, provenance, immutability, and finality (Andolfatto, 2018). While the concept of a ledger is not new, the implementation of blockchain in a decentralized and distributed network is innovative, enabling efficient, verifiable, and permanent transactions among multiple parties (Iansiti & Lakhani, 2017). These features provide a higher level of security compared to traditional ledgers (Hofmann, Wurster, & Böhmecke-Schwafert, 2017).

How Does the Blockchain work?

The blockchain stores transactions in blocks, which are linked together based on cryptography rules. The process involves:

• a)

  An active node in the decentralized network generates a transaction request.

• b)

  Other nodes validate the request through a process called mining, where they collaboratively solve a computationally intense mathematical problem.

• c)

  The first node or cluster to solve the problem broadcasts the solution to other miners for confirmation.

• d)

  Once confirmed, the transaction is added to a block, timestamped, and linked to the previous block (Zamani, He, & Phillips, 2018).

Blockchain Use Cases

Blockchain technology has experienced significant growth and is now an integral part of various industries, including:

• a)

  Cryptocurrency: Blockchain enables borderless transactions and helps enforce regulations against fraudulent activities (Sigalos, 2022).

• b)

  Logistics & Supply Chain (e.g., Maersk): Blockchain integration, like TradeLens, addresses regulatory requirements and compliance while serving multiple governments and business needs (Jensen, Hedman, & Stefan, 2019).

• c)

  Art (NFTs): Ownership and copyright issues arise with non-fungible tokens, questioning who owns them (Chinlund & Gordon, 2021).

• d)

  Real Estate: Smart contracts on the blockchain provide transparency, but protecting personally identifiable information (PII) access becomes crucial (Author, Year).

• e)

  Healthcare: The challenge lies in limiting and safeguarding protected health information (PHI) on a public blockchain platform (Author, Year).

However, the implementation of blockchain in different industries requires diverse audit capabilities, Information Assurance Frameworks, and compliance with specific laws. As blockchain technology is rapidly adopted across industries and functions, regulations, policies, and laws are still limited. This research paper will explore how the Information Systems Audit domains provided by ISACA connect with blockchain concepts to assess their impact and develop frameworks and controls for effective blockchain auditing.