| Pub. Date | : Jan, 2020 |
|---|---|
| Product Name | : The IUP Journal of Accounting Research and Audit Practices |
| Product Type | : Article |
| Product Code | : IJARAP10120 |
| Author Name | : Sean Stein Smith |
| Availability | : YES |
| Subject/Domain | : Finance |
| Download Format | : PDF Format |
| No. of Pages | : 11 |
Blockchain technology and cryptoassets may have seized the attention of the financial services space, but as the technology ecosystem continues to mature there are additional considerations coming to the forefront. Smart contracts represent an important piece of the blockchain conversation and play a critical role in how blockchains interact with other technology platforms. Accounting and auditing professionals will need to understand both how smart contracts function, and also how these applications will impact accounting and auditing processes. The present paper, written keeping both the academic and practitioner audience in mind, seeks to examine how smart contracts interact with blockchain technology, analyze how these applications can change audit processes, and propose potential future roles for the profession.
As blockchain increasingly gets integrated into different industry verticals, the conversation continues to evolve and develop away from simply understanding the core functionality of blockchain technology. Highlighted by the adoption and implementation of blockchainbased platforms and tools by global organizations such as JP Morgan and Walmart, the expectations to be able to examine information stored on this platform continues to increase. Reviewing the need for examination, audits, and eventual publication of such information, the following reality is becoming evident. Blockchains, regardless of how they are constructed or implemented, are limited in what they are able to accomplish on their own. In order for any blockchain platform to effectively operate as advertised, there needs to be other additional tools to facilitate the transmission and communication of data between various technology systems. Smart contracts appear to represent a potential solution to the following dilemma that arises when this topic is discussed. As permissioned blockchains become integrated into supply chains, designing bespoke or otherwise customized application programming interfaces does seem to represent a realistic option. Permissioned blockchains have emerged as a viable business tool due to the scalability enabled by this iteration, but this scalability may be limited by the lack of standardized smart contract tools. Examined in the context of an accounting audit, the importance of smart contracts extends far beyond financial statement implications.