With blockchain technology and cryptocurrencies occupying the agenda of the economy world more and more every day, the rules of accounting and auditing are also being rewritten. Blockchain technology is generally not dependent on a central authority, it is a distributed database and recording system called blocks, which is constantly growing. Everyone is transparently informed about the details of all transactions that take place in the specified database and registration system, and transactions are also protected by digital signatures (cryptography). Crypto money, on the other hand, is an internet-based digital currency that uses cryptography to secure financial transactions and is not connected to a central authority.
Finance sector of blockchain technology, banking, e-government, digital identity, internet of things (IOT), health sector, education sector, retail industry, legal system, insurance, real estate industry, music industry, supply chain management, marketing There are many application areas, including the press, tourism, telecommunications and automotive sector. Therefore, crypto coins are a cluster that includes Bitcoin and sub-coins. Blockchain technology, on the other hand, is an ecosystem that includes cryptocurrencies as a higher cluster.
The emergence of blockchain and cryptocurrencies is said to be owned by a person, nicknamed Satoshi Nakamoto, in 2008. Although the blockchain technology was designed for crypto money Bitcoin when it was first developed, it has started to make a name for itself with different application areas over time. In addition, various alternative altcoins to Bitcoin started to be traded later. Undoubtedly, all these important developments have raised a new critical question: "What Do Blockchain Technology and Cryptocurrencies Bring to Accounting and Auditing?"
First of all, it is necessary to touch on the issue of accounting for cryptocurrencies, in other words, the recognition and evaluation of cryptocurrencies is not bound by a specific legal legislation. Transactions regarding the registration, reporting and evaluation of cryptocurrencies are required, taking into account the basic principles and concepts of accounting and reporting standards. There are various approaches to how cryptocurrencies should be accounted for. According to the aforementioned approaches, some authors, academics and practitioners, cryptocurrencies should be considered and evaluated as a "commodity". On the other hand, another group argues that it would be more appropriate to accept and evaluate cryptocurrencies as "ready value". In addition, it is stated in some studies that it would be more accurate to accept and evaluate crypto currencies as "securities".
Finally, there are also opinions advocating the recognition and evaluation of cryptocurrencies as “money”. In cases where crypto currencies are accounted for and evaluated as "commodity / commodity", they are registered under the Other Inventories account. When cryptocurrencies are accounted for and evaluated as "cash value", they are followed under the Other Liquid Assets account. When crypto currencies are considered as "securities", accounted for and evaluated, the Other Securities account is used. Finally, when it comes to accounting and evaluating cryptocurrencies as “money”, sub-accounts are opened under the Cash Account and monitoring is performed. In the international arena, it is stated that as a new and additional approach, cryptocurrencies should be recognized and evaluated as "intangible assets". From a general perspective, there is no generally accepted rule for the accounting and evaluation of cryptocurrencies. Therefore, the issue of accounting and evaluation of cryptocurrencies in the future, International Accounting Standards (IAS), International Financial Reporting Standards (IFRS) may find a wide place.
Make less mistakes, more compromise
Furthermore, the ownership of business assets in an accounting sense and the status of existing business assets and foreign resources will be much more certain thanks to blockchain technology. Accounting is a science related to recording, classifying, summarizing, reporting, analyzing and interpreting transactions and events that can be expressed in money. With blockchain technology, it will be possible to focus on planning, action taking and strategy development activities rather than bookkeeping activities in accounting. In this context, it is highly likely that the importance of classical bookkeeping accountancy will decrease and the working areas of accountants in the specified area will be eroded. In the future, accountants will turn this into an opportunity by providing services, consulting and solutions related to blockchain and cryptocurrencies. Because blockchain technology will also accelerate the integration of accounting science with machine learning, artificial intelligence, cloud technology and data analytics. In addition, blockchain technology will mean working more effectively for accountants, making less mistakes, more compromise, and minimizing cheating.
Inspection work will be completed faster
Blockchain technology and cryptocurrencies shape auditing as well as accounting. In other words, blockchain technology, cryptocurrencies and the paths of control are increasing day by day. Auditing is a systematic process that objectively collects and evaluates evidence in order to investigate the extent of compliance of events related to business activities with predetermined criteria and to report the results to those who are interested. Because blockchain technology can record transactions between the two parties in an efficient, persistent, and verifiable manner, and serves as an open, transparent and distributed database, blockchain technology will primarily serve as a means of verification / verification of financial transactions. To give an example, today both internal auditors and external auditors (independent auditors) frequently make use of letters of understanding. At the same time, auditors, financial analysts, and bank loan allocation departments frequently request firms' financial statements. Thanks to blockchain technology, it is predicted that these and similar transactions will be completely eliminated and eliminated. Undoubtedly, this will ensure that audit processes are completed much faster and costs are minimized.
'Partial assurance' will be closed, 'Full assurance' will be transferred
In addition, today, due to time constraints and financial constraints, auditors cannot audit all departments, transactions and accounts in companies while conducting audit activities. Therefore, the sampling method is used in the audit. Thanks to blockchain technology, the sampling method in auditing is expected to become a thing of the past. Because, thanks to the blockchain technology, auditors will be able to audit all departments, transactions and accounts that are subject to audit, covering all periods. In other words, since the entire statistical universe subject to inspection can be inspected, sample selection will no longer be necessary. At this point, it is not at all difficult to say that the "partial assurance" era in auditing will be over and the "full assurance" era will be passed.
In addition, while it will take months to audit a number of high-value and consistent transactions today, with the help of blockchain technology, this time will be reduced to a few hours. In addition, in our age, financial statement audits are carried out in the form of year-end audits (December 31st audits) or interim audits. However, thanks to blockchain technology, period-end (December 31) audits and interim audits will also be replaced by permanent (simultaneous) online audits. In fact, once blockchain technology completes its evolution, it will be possible to perform fully autonomous audits.
Problem with hacking from software vulnerabilities
On the other hand, various hacking cases related to blockchain-based cryptocurrencies have been observed so far. In the aforementioned hacking incidents, the problem is not in blockchain technology, but is caused by software vulnerabilities. Therefore, one of the impacts of blockchain technology on auditing in the upcoming periods is that audit processes will shift towards measuring the effectiveness of internal information technology controls.
For example, auditors will need to check in advance whether autonomous information technology systems have been set up to prevent cryptocurrency sending to wrong addresses. At the same time, auditors will need to check whether companies have systems that enable them to counter, prevent and detect attacks related to blockchain and cryptocurrencies. In addition, the control of whether the systems are installed against risks such as the loss and theft of keys used in blockchain technology will be one of the new activities that fall under the responsibility of the auditors. From a general perspective, with the digital transformation, it will be inevitable for auditors to offer more complex assurance services and raise the bar.
Supervisors partner with technologists strategically
In addition to all these, nowadays, there are audit and internal control software specially developed for companies by various audit, consultancy and information technology companies. It seems that in the future, boutique software that provides the control of crypto money transactions will also come to the fore within the scope of effective solutions for companies. At this point, agreements, strategic partnerships and collaborations that audit firms will make with technology firms will tend to increase.
However, beyond this, it will be inevitable for audit firms to employ increasing rates of blockchain and cryptocurrency experts alongside classical accountants and auditors. Because, as blockchain and cryptocurrency investments increase, the demands for control over them will also increase. Thanks to the software that controls crypto money transactions, the time between financial transactions and their control will be significantly reduced, which will increase the effectiveness of the audit. Concurrent audits will allow supervisors and business management to concentrate on risky and more complex transactions.
It will not destroy the accountancy and auditing professions
Finally, blockchain technology will not destroy the accounting and auditing professions. However, it is imperative that accountants and auditors adapt to change and prepare themselves quickly for blockchain technology and accounting for cryptocurrencies and not to miss the train. Just as Industry 4.0, which is accepted as the fourth generation of the industrial revolution in terms of global competition, should not be missed, blockchain technology and cryptocurrencies should not be missed by accountants and auditors in the same way. Blockchain technology and the concepts of accounting for cryptocurrencies will also be included in the exam contents in the future to obtain various accounting licenses, accounting and auditing certifications. Since blockchain technology and cryptocurrencies are becoming more and more prominent in related application areas in accounting and auditing, accountants and auditors specializing in these areas will provide significant advantages to them in the future.
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