Blockchain and internal control
As blockchain becomes more mainstream, it is appropriate to focus on how this technology intersects with an organisation’s internal control. With careful implementation and integration of blockchain, the distinctive capabilities of blockchain can be leveraged to create more robust controls for organisations. Further, blockchain-enhanced tools have the potential to promote operational efficiency and effectiveness, improve reliability and responsiveness of financial and other reporting, and improve compliance with laws and regulations. At the same time, blockchain creates new risks and the need for new controls.
The COSO Internal Control — Integrated Framework (2013) provides an effective and efficient approach that can be leveraged to design and implement controls to address the unique risks associated with blockchain.
As organisations contemplate the use of blockchain, they should know the following 10 things:
- Information about blockchain in the news and on the Internet is often misleading or incorrect.
- Blockchain encompasses far more than digital assets; the benefits it can bring to an organisation can be substantial.
- Blockchain is not magic; it comes at a cost and doesn’t eliminate all risks. In fact, it introduces new risks.
- Knowing how blockchain works is crucial for evaluating, preparing for and managing blockchain’s impact on internal control and the organisation as a whole.
- Blockchain has both technology and governance implications.
- Blockchain will not make management, accountants, or auditors less relevant, although it will impact what they do and how they do it.
- Blockchain requires new skill sets (eg data science for greater hindsight, insight, and foresight) and new collaboration within and across organisations.
- Now is the time to educate and engage stakeholders throughout the organisation.
- Blockchain is still in flux and continues to evolve.
- Adoption of blockchain may not be a choice.
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Content reviewed: 24 August 2021