Woman using her phone for blockchain

A World Economic Forum study identifies blockchain as one of six software and services megatrends that is currently reshaping society. (Foxy burrow/Shutterstock)

Canada | Economy

Blockchain: the biggest story in information storage and exchange 

Blockchain is the most disruptive technology to face CPAs in decades, and yet it remains one of the least understood

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It seems like everybody is talking about bitcoin these days, as the shiny object has attracted many speculators with its boom-and-bust price jumps. Yet the underlying technology behind bitcoin, blockchain—which effectively cuts out the middleman, in fields from finance to law to social media—is by far the bigger story. And it’s a story that will endure for many years to come. 

What exactly the impact of blockchain will be, as it relates to finance and the world of accounting, is still a matter of some debate. But in a nutshell, the technology represents a single ledger that records transactions between organizations, suppliers, customers and other stakeholders. In March 2018, CPA Canada published a report entitled Blockchain Technology and its Potential Impact on the Audit Profession that tried to address some of the concerns people in the accounting profession have about the technology—as well as the opportunities that it presents. 

For CPAs, blockchain represents the next push in total transparency, as a single ledger would (in theory) reduce the risk of fraud and accounting errors. If you’re doing business via blockchain, all the linked computers in the network will identify you and verify that you have permission to transact. If you’re due to pay $100 and you transfer $80, for instance, other blocks will identify the error. A World Economic Forum study identifies blockchain as one of six software and services megatrends that is currently reshaping society. Of the 800 executives and experts surveyed, from the information and communications technology sectors, a majority expected that 10 per cent of global GDP could be stored on blockchain technology by 2025.  

So what does it mean for a CPA? As the CPA Canada report points out, blockchain technology offers an opportunity to streamline financial reporting and audit processes. “Today, account reconciliations, trial balances, journal entries, sub-ledger extracts, and supporting spreadsheet files are provided to a CPA auditor in a variety of electronic and manual formats. Each audit begins with different information and schedules that require a CPA auditor to invest significant time when planning an audit. In a blockchain world, the CPA auditor could have near real-time data access via read-only nodes on blockchains. This may allow an auditor to obtain information required for the audit in a consistent, recurring format.” 

While many CPAs worry that “disintermediation” is just another word for redundancy, the experts are adamant: fear not. While some lower-level mundane tasks will be replaced by things like blockchain or AI, many more higher-level roles will be created or augmented. Future roles for a CPA, as the report points out, include auditing the smart contracts embedded in the blockchain or arbitrating disputes among blockchain participants. “This function is analogous to the executor of an estate,” write the report’s authors, “a role typically filled by various qualified professionals, including CPA auditors.” 

 As futurist Jim Carroll recently told CPA Canada, in advance of his May keynote speech to the National Forum on Technology Solutions: “If you go to Popular Science and Popular Mechanics magazines from the 1930s, there were all these articles of hysteria about the giant robot brains that were going to take away our jobs. It’s the same talk today: that we’re all going to be automated and auditing is going to be automated. What people don’t talk about is, as jobs transition and disappear, new jobs and new skills appear and new capabilities appear.” 

In the blockchain future, for instance, management could give a set of blockchain digital “keys” to external auditors that would provide unprecedented access to detailed, timestamped information about all transactions. “Such access could significantly impact an auditor’s approach to an audit,” notes CPA Canada’s March report. “Enterprises that use the blockchain could conduct continuous internal audits on their processes, supply an audit trail and provide account analysis at the push of a button.’ 

In other words, no matter how disintermediated the technological future, there is still a need for strategic thinkers, with measured judgment, to be pushing those buttons and interpreting the numbers.