Can Bitcoin Style Validation Solve Financial Statement Fraud?
A financial professional in the United States suggested that the stock market would crash if real-time insurance and reporting were one thing. Does this mean that the majority of listed companies lie in their financial statements?
An audit is supposed to help ensure that management does not abuse positions of trust. And therefore, external auditors have long been viewed by the general public as the guarantors of trust and the cornerstone of trust in the global financial system.
The public perception is that auditors are required to check a company’s books to provide assurance that everything is in order. However, history repeated itself over and over again with the disappearance of Carillion, Thomas Cook, Patisserie Valerie and, more recently, the looming failure of Evergrande, over listeners’ inability to detect impending disaster and protect the interests of investors.
How many disagreements with management were filed with regulators by auditors in the lead-up to the 2008 financial crisis? Did they have an obligation to file such disagreements? Don’t you think they saw what was about to happen?
Why are listeners considered by many to be the White Knights, when they so often fail to warn the public of impending financial disaster? What are the limits of the audit exercise?
Is the approach of performing an audit inherently flawed since it is unable to audit all transactions? It appears that this issue was resolved on January 3, 2009.
Audit chain laboratories from Zug, Switzerland, which is the streaming partner at this week’s CryptoAM Summit in London, appears to have combined a Layer 2 Ethereum protocol with higher-order semantic logic based on Xtensible corporate reporting language “XBRL” to define the rules relating to the state of validity of a declaring entity according to its declaration style and its declaration scheme. XBRL is already mandated by Her Majesty’s Revenue and Customs and is a mandate in 49 other jurisdictions. The Financial Reporting Council in the United Kingdom is appointed to his charge.
An audit does not provide absolute assurance on the veracity and sincerity of financial accounts since it does not verify 100% of transactions. It applies a sampling approach. This methodology emphasizes “materiality” and not accuracy. This is not what happens on the Bitcoin or Ethereum blockchain. Balances are proven since genesis based on 100% validation of all transactions by an army of miners.
Auditors are not mandated to detect fraud, since auditing standards ultimately place the responsibility for preventing and detecting fraud on management, auditors have always had a no-exit card. jail.
At the same time, audits are an annual mandate for listed companies. The accounting, auditing and financial reporting services industry is growing at a rate of 5% to 6% and is expected to reach £ 500 billion by 2023. So if these independent eyes are justified because of the number mutually agreed upon caveats between the two parties, and in some cases only get away with fines, are conventional audits really part of the problem rather than the solution?
Before the advent of the blockchain, we could only wish for a technology that would allow 100% of transactions to be audited. But with blockchain, the prayers of investors and stakeholders who cannot affect the decisions of companies in which they have a stake have been answered.
A virtual audit and reporting machine
Now imagine a world where 100% of all transactions, invoices, purchase orders, contracts can be audited continuously. Not once a year, but continuously over 365 days using a “clean-as-you-go” approach and by a plurality of “external validators” running the Auditchain Protocol software called: Pacioli. When the company’s books don’t even need to be closed and any stakeholder can rely on this financial data at any time of the year, whether for an investment decision or just for valuation the financial health of the company. This is what Auditchain is building: a decentralized virtual machine for accounting, reporting, auditing and analysis.
With a sampling approach that only examines 5-10% of annual transactions, auditors can miss out on fraud. But with 100% inclusion of transactions and a crypto audit trail, it becomes costly to commit fraud by perpetrators and dramatically increases the ability of auditors to detect fraud.
Not only can a company accurately express its financial position, but auditing becomes continuous and automated. From an IT perspective, the modern enterprise is becoming a state machine. His accounts are undergoing state changes. The Auditchain virtual machine, populated by an army of chartered accountants and CPAs, validates all changes in the state of the business and the business articulates these changes with precision.
Along with the technological transformation initiated by Auditchain, a paradigm shift is also required from the industry. Remember that technology alone does not solve problems. People do. It does not create prosperity. People do. In democratic nations, people also vote. Auditchain can solve problems that regulators and governments can’t or won’t.
The AUDT token generation event is currently in progress. AUDT is used for the settlement of financial reporting and insurance obligations, royalty payments for developers and auditors of NFT process control and for solid governance on the Audit chain protocol.
The field of accounting, reporting and auditing is highly centralized and complex. Accountants and other actors in the Audit Chain Protocol collaborate as members of the Association Alliance DCARPE which sets the standards and acts as the governance board for the audit chain protocol.