The introduction of blockchain technology has ushered in a new era in the field of auditing. This study explores the multifaceted impact of blockchain technology on auditing practices, emphasizing its potential to revolutionize audit methodologies. The fundamental principles of blockchain and its implications in the auditing domain are explored extensively. Moreover, the chapter also discusses the role of auditors in navigating the complexities of blockchain. As the digital auditing landscape evolves, blockchain emerges as a powerful tool that promises to improve the credibility of financial reporting, making it imperative for professionals, academics, and regulators.
TopI. Introduction
Blockchain first emerged as a core technology behind the well-known Bitcoin cryptocurrency1 in 2008. Blockchain technology is motivated by its use of peer-to-peer network technology in tandem with cryptography2. The integration enables strangers to conduct transactions with each other without needing a conventional trusted broker, such as a bank or payment processing network. Blockchain technology will massively reduce transactional costs and decrease transaction processing time by replacing the broker and harnessing the power of peer-to-peer networks (Jiang, 2018; Sadu, 2018; Varma, 2019, Hou et al., 2023). Furthermore, blockchain will revolutionise and change a wide variety of industries, ranging from public services to private services (Mahbod & Hinton, 2019; Ng, 2019). Therefore, a variety of capital investment businesses and large companies participate in blockchain technology research and testing to reengineer irrelevant practises and business models. For example, Binance is a worldwide leading exchange for cryptocurrencies, offering a wealth of functionality, trading pairings, security, and liquidity at a minimal fee. According to Coinmarketcap.com, the volume of traded cryptocurrency on Binance was worth $2,438 million in October 2019, which came majorly from trading Bitcoin.
The increasing adoption of cryptocurrencies indicates they have the potential to disrupt how businesses operate in the near future. Given that the blockchain technology functions as a public ledger for cryptocurrencies transactions, it is likely that such technology is able to transform multiple industries, which include the auditing profession. However, there is still a lack of research studies on how this technology will assist auditors in their auditing work. Specifically, one of the main issues confronting auditors concerns how the application of blockchain in auditing will benefit auditors in discharging their functions. Blockchain technology is advancing at a faster rate than the internet, which took two decades to build and another decade to mature as a business network (Tapscott & Tapscott, 2017). Many scholars have recently highlighted the potential of blockchain in providing real-time auditing, such as the ability to speed up audit preparation, allowing auditors to focus on riskier transactions, reducing fraud risk, providing consistent document format in real-time, enabling inventory measured in real-time, saving time on document confirmation, and no longer requiring traditional sampling techniques (Abreu, Aparicio, & Costa, 2018; Bible, Raphael, Riviello, Taylor, & Valiente, 2017; Bone, 2018; Cong, Du, & Vasarhelyi, 2018; Hoelscher, 2018; Jiang, 2018; Mahbod & Hinton, 2019; Nathalie, Gauthier, Morin, & Arber, 2019; Sadu, 2018; Tysiac & Drew, 2018). Understanding the current development of technology is critical in light of the fact that particularly important considering that a blockchain system would improve audit efficiency and effectiveness. Nevertheless, it is critical that one should recognise that there is a downside to every invention discovered. Therefore, this paper discusses those benefits as well as limiting the new technology in the context of auditing.