Audit committees will feel the impact
Blockchain. Everyone’s talking about it. Some hold it will be just as revolutionary for transactions as the Internet was for information—but not everyone understands its implications.
As a technology that can provide real-time, permanent verification for financial and operational transactions (payment card transactions, for example, or product shipping transfers along the supply chain), blockchain is poised to have a major impact on every industry, from banks, asset management, and insurance to mining and beyond.
What is Blockchain?
The blockchain is a shared digital record of transactions or information of any value, between two or more parties. Traditionally, validating something online requires multiple systems that must be coordinated by multiple parties. Blockchain enables a more integrated solution. It is a decentralized, distributed ledger, meaning transactions are shared and replicated in real time on computers located at every node thus promising verifiability independent of a single source of truth. Transactions are stored in batches inside “blocks” that become part of a contiguous “chain,” with each block time-stamped and continuously verified by the blocks that precede and follow it. This makes the ledger permanent and virtually tamper proof—a shared source of truth that uses public and private key cryptography to sign transactions digitally. Importantly, there is no central authority for verification; rather, it is an autonomous system, where verification occurs as a function of its distributed, consensus based structure. It does not require an individual administrator, and no one can enter or change a transaction without it being authenticated by network peers.
Sweeping implementation of blockchain technology won’t happen overnight, but when such a ledger becomes easy for businesses and auditors to consult—when once a transaction is recorded, it cannot be hidden or altered—the way businesses are audited will clearly change, as will the responsibilities and agendas of the audit committee.
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