Blockchain technology could bring advantages to the audit industry

The adoption of the blockchain in the financial audit was a recent research objective of Sean Cao, professor and co -founder of the Smith AI Initiative for Capital Market Research at the Robert H. Smith School of Business of the University of Maryland. “Many audit companies want to use the blockchain and they want to apply technology,” he said. “I wanted to build a use case for the blockchain that works for audit companies.”

The study “Distributed Lidgers and Secure Multipsy Computation for Financial Reporting and Audit”, recently published in Management scienceExamine how “authorized blockchains disrupt traditional processes of financial and audit reports and allow collaboration without sacrificing the confidentiality of customer data”.

Co-author with Lin William Cong by Cornell University and Baozhong Yang by Georgia State University, the document indicates that “impartial financial reports are crucial in the financial markets”, regulatory organizations are looking for means to improve the integrity of the reports “. In order to ensure that the financial statements are correct, the audit team must confirm the transaction. CAO says that the Difficulty with regard to long, the transaction partner does not want to reveal information due to confidentiality problems and there is often a low response rate of the transaction partner.

“It is a high intensity of labor and you cannot check all the receipts,” explains Cao. “It would be necessary to make a random sample. But there would be mistakes because it is really random.”

Using a big book distributed based on blockchain, Cao declares that the system developed in the document can help solve these problems by automatically checking all receipts effectively and profitable. In addition, it improves confidentiality protections when sharing information between different listeners or customers.

“The only thing he cannot replace is when a transaction requires discretion,” adds Cao, but says in all cost savings of 70% for audit companies to adopt this method.

CAO claims that the global adoption of this process is necessary for it to have an impact, so the team has built a mathematical model to model the incentive to listeners, customers and regulators.

“We are trying to maximize the unit of the three parts,” he said.

Cao had previously published research on the design of the system, a prototype, in “Architecture for Audit Automation and Trust Building in Public Markets”, in the publication Ieee Computer In 2020. CAO also worked here with Cong and Yang with Meng Han from Kennesaw State University and Qixuan Hou of the Georgia Institute of Technology.

CAO hopes to carry out additional research in this area which continues to inspire and have an impact in the industry.