BLOCKCHAIN AUDITING – ACCELERATING THE NEED FOR AUTOMATED AUDITS!

Abstract

This article explores issues related to auditing Blockchain ledgers (BC) or Distributed Ledgers (DL). These are very new technologies and audits thereof are in the infancy stage. While auditing BC/DL networks in the future is still being studied, we believe this paper will provide food for thought and discussion. That said, we also believe that due to the structure of these new technologies audit approaches are sure to include the use of continuous controls/analytics and continuous monitoring. We discuss BC attributes that have resulted in assumptions that the BC is self-auditing. While in some respects they are, there are significant new risks on blockchains which require new controls and audit programs. New control features in a BC/DL include the concept that all the users have a complete copy of the ledger with all the data and all the transactions and system features that make transactions immutable – plainly speaking, they cannot be changed. We explain the Consensus Mechanism for a BC and how it and public/private keys replace heretofore traditional controls. Assertions such as occurrence, completeness, cutoff, accuracy, etc., are all addressed by BC systems providing significant improvements in control precision. There are, however, new assertions and controls that need to be addressed with BCs and new risks especially with the introduction of smart contracts. We have assumed the reader has a basic level of understanding about a BC. For further background we recommend you consult our bibliography. As noted, we do not believe this paper has all the answers or addresses all the risks associated with BC/DL. We trust new approaches will be leveraging a whole new set of controls and audit practices unique to this exciting rapidly emerging technology.