Abstract
This chapter focuses on exploring the implications of blockchain technology on the practice of financial auditing. It begins by explaining the fundamentals of financial auditing, and then provides a historical context for digitization within auditing. This is followed by a thorough examination of blockchain technology, including its architecture, characteristics, and categorizations. The chapter then highlights the integration of blockchain into financial auditing, highlighting benefits such as improved risk management, automated audit processes, fraud reduction, cost savings, and the emergence of a continuous audit model. The changing role of auditors in this technologically evolving landscape is also discussed. This synthesis provides an in-depth perspective on the transformative potential of blockchain to improve the efficiency and transparency of financial audit.
TopThe Financial Audit
Financial auditing is a crucial discipline that plays a leading role in the verification, authentication and validation of organizations' financial and accounting data. In this section, we will focus on an in-depth exploration of three essential facets of this profession: the definition of financial audit, the structuring and hierarchization within the field, and the constituent stages of the audit process.
Definition of a Financial Audit
Financial audit is defined as “the critical examination carried out by an independent professional external to the company in order to express a reasoned opinion on the fairness of the image given by the company's financial documents” (translated from Obert, 1994).
This definition can be supplemented as follows: “Financial auditing is the examination by a competent, independent professional of a company's financial statements with a view to expressing an opinion on their fairness and accuracy” (translated from Raffegeau et al., 1994).
According to ISA 200 of the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Automatic Control (IFAC): “The objective of an audit of financial statements is to enable the auditor to express an opinion that the financial statements have been prepared, in all material respects, in accordance with an applicable financial reporting framework”.
In conclusion, a financial audit is a methodical and documented examination of a company's financial statements performed by an independent external auditor. The objective is to determine the accuracy, compliance with accounting principles and laws, and reliability of financial information to provide a sound basis for financial decisions.
Key Terms in this Chapter
Financial Audit: A financial audit is an in-depth examination of a company's or organization's financial statements by an independent auditor. The objective is to ensure that the financial statements give a true and fair view of the financial position and results of operations of the audited entity.
Digitalization: Digitalization is the process of converting information from analog to digital format. This typically involves converting information in physical form (paper documents, photographs, films, etc.) into digital files that can be stored and processed by computers.
Smart Contract: A smart contract is an automated computer program that executes the terms of a contract. It is an agreement whose terms are written directly in lines of code. The smart contract enables the exchange of value (money, property, shares, or other assets) by automatically verifying compliance with rules and obligations.
Blockchain: Blockchain is a decentralized technology for storing and transmitting information. Technically, it consists of a distributed database in which the information sent by users and the links within the database are verified and grouped into blocks at regular intervals, all secured by cryptography.
Artificial Intelligence (AI): Artificial intelligence (AI) is the field of computer science that aims to reproduce human cognitive abilities in machines, such as learning, problem solving, language comprehension, image recognition, etc.