FIN-TECH POWER OF BLOCKCHAIN TOUCHING CHORDS WITH CHARTERED ACCOUNTANTS:
Blockchain is the future, it’s an accounting technology. Its rapid expansion, induction, and acceptance in the industrial and real-world are pacing up. Let’s bridge gaps in the Tech world as its Fin-Tech world, Where the prefix of Fin-tech is as important as the suffix. Blockchain offers a drastically new way to record, process, and store financial transactions and information, and has the potential to fundamentally change the landscape of the accounting profession and reshape the business ecosystem. The accounting profession is broadly concerned with the measurement and communication of financial information, and the analysis of financial information. For chartered accountants, blockchain provides clarity over ownership of assets, the existence of obligations and could improve the efficiency of everything manifolds. Broadly stating our work under, SA 330 Auditor’s Responses To Assessed Risk
Test of controls — An audit procedure designed to evaluate the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements at the assertion level. Four types of Test of Controls
Blockchain has the potential to reduce the costs of maintaining and reconciling ledgers and providing absolute certainty over the ownership and history of assets. Blockchain easily quantifies and qualifies the available resources and obligations of organizations. It would free up resources so that Chartered Accountants can concentrate on planning and valuation, rather than just performing more time auditing the manually kept records.
By eliminating major reconciliations and providing certainty over transaction history audit trail can be seen as a digital footprint easily. Blockchain is increasing the scope that is just difficult or unreliable to measure, such as the value of the data that a company holds.
Imagine if data reconciliation, debtor, and creditor checks are made easy. Example: While in due diligence of mergers and acquisitions, distributed consensus over key figures will be easily traced which will allow us more time to be spent on judgemental areas, advice, and an overall faster process of an active implementation strategy.
IMPLICATIONS OF THE FIN-TECH WORLD
BLOCKCHAIN IN AUDITS:
Performing confirmations of a company’s financial status would be less cumbersome. Digital footprints and trails are existent which cannot be forged and are easily visible on blockchains. This means a complete paradigm shift in the way our industry works. A blockchain can easily couple up appropriate data analytics, could help with the transactional level assertions involved in an audit, and the auditor’s skills would be better spent considering higher-level analytics and examination.
For example, auditing will be of a much more acute level than just verification of detail of the transaction, intermediary parties involved and the monetary amount, but also how it is recorded and classified. If a transaction credits cash, is this outflow due to the cost of sales or expenses, or is it paying a creditor, or creating an asset? With blockchain in place, the auditor will have more time to focus on important and more pertinent questions.
- OPPORTUNITIES UNDER BLOCKCHAIN MECHANICS :
Many opportunities for the accountancy profession are available as the movement of financial information in significant blockchain takes place. Chartered Accountants are seen as experts in guiding for record-keeping, application of complex rules, business logic, and standards-setting. They have the opportunity to guide and influence how blockchain is embedded and used in the future, and to develop blockchain-led solutions and services.
To become truly an integral part of the financial system, blockchain must be developed, standardized, and optimized. This process is likely to take many years — it has already been on market since 2009 when bitcoin was released as open-source software. The need for reconciliation and dispute management, and the tussles with the increased certainty around rights and obligations will be automated, transactional assurance and carrying out the transfer of property rights will be transformed by blockchain and smart contract approaches.
Which in turn will allow greater focus on how to account for and consider the transactions, and enable an expansion in what areas can be accounted for.
- ADOPTION OF BLOCKCHAIN BY BANKS IN INDIA:
As per the recent news of Economic times, June 2021, Fifteen banks have come together to form a new company that will use blockchain technology to process inland letters of credit (LCs) in the first such initiative.
Bankers said that the new system will verify data using invoices on goods and services tax (GST) and e-way bills which will quicken transactions and also eliminate the risk of fraud.
The company called Indian Banks’ Blockchain Infrastructure Co Pvt Ltd (IBBIC) will have fifteen shareholders holding an identical 6.66% 6.66% stake in the company.
The parts of accounting concerned with transactional assurance and carrying out the transfer of property rights will be transformed by blockchain and smart contract approaches.
- ADOPTION OF BLOCKCHAIN IN COVID19 CERTIFICATE ISSUANCE:
On May 26, 2021, As blockchain enters the mainstream, the Maharashtra government’s Disaster Management Department has adopted the technology, in partnership with a startup Print2Block, to issue COVID-19 test certificates. The certificates are issued to people who test negative for COVID-19.
- FIRST NATION TO ADOPT BITCOIN AS LEGAL TENDER MANY MORE TO GO IN COMING YEARS:
Gradually nations will embark themselves with a parallel currency El Salvador being the first one. I was a part of the same meeting amongst 22000 people across the world who joined in Twitter spaces to see the same
This month, El Salvador’s President Nayib Bukele touted the cryptocurrency’s potential as a remittance currency for Salvadorans overseas. El Salvador has been using the US dollar as legal tender for the past two decades after abandoning its currency.
How are Blockchain and the Adoption of Cryptocurrency affecting us in the long run?
As a result of the above, the spectrum of skills represented in accounting will change. Some work such as reconciliations and provenance assurance will be reduced or eliminated, while other areas such as technology, advisory, and other value-adding activities will expand.
To properly audit a company with significant blockchain-based transactions, the focus of the auditor will shift. There is little need to confirm the accuracy or existence of blockchain transactions with external sources, but there is still plenty of attention to pay to how those transactions are recorded and recognized in the financial statements, and how judgemental elements such as valuations are decided. In the long term, more and more records could move onto blockchains, and auditors and regulators with access would be able to check transactions in real-time and with certainty over the provenance of those transactions.
Accountants will not need to be engineers with detailed knowledge of how blockchain works. But they will need to know how to advise on blockchain adoption and consider the impact of blockchain on their businesses and clients. They also need to be able to act as the bridge, having informed conversations with both technologists and business stakeholders.
CA Riddhi Jain