Blockchain Technology and its Impact on the Audit Process: A Study of Blockchains Impact on the Audit Process and the Future Role of Auditor

Abstract

As one of the many emerging and new technologies, blockchain technology is anticipated to disrupt the audit process and the audit profession in its entirety. This thesis aims to provide a general understanding of the concepts driven by blockchain, to predict how the audit process will be affected by the technology, and what role the auditor will play in the development. To do this, the authors present the current literature within the field of blockchain in the auditing environment and link it with a practical fictitious example of an audit, before and after implementation of blockchain technology. The thesis takes its outset in the research philosophy of critical realism. Since the existing literature on the examined topic is sparse, the approach to theory development is an inductive research logic used to explore the phenomenon in a practical setting. The research has an interview-based strategy that combines semi-structured interviews with an examination of secondary data. The research method is based on three interviews with four experts, working within the field of auditing and teaching. Two of our interviewees have over 15 years of practical experience as auditors, and the last two are chosen based on their theoretical knowledge, within blockchain technology and the audit process. The data analysis procedure was based on a thematic analysis to explore patterns in the collected data. The credibility is ensured by deploying a thorough analysis that accounts for the perspectives of all the interviewees, positive as well as negative. The transferability of the thesis is ensured by providing full descriptions of the research methods deployed. From the data analysis, four main concepts were developed along with a case that illustrates a practical fictitious example of the audit process pre- and post-implementation of blockchain technology. More specifically, the concepts found elaborate firstly on the interviewee’s expectations on how the blockchain technology will affect the audit process. Secondly, that timing is central to solving ‘the first-mile problem’ successfully, which implies taking the risk of making large initial investments. Thirdly, that the one responsible for the broad implementation requires resourceful companies or the government itself. Finally, it was concluded that auditors need to develop new skills to understand the overall digital transformation in the audit profession. The practical example concludes that while reconciliations and external confirmations are verified by the blockchain, auditors are required to invest more time into complex areas of the audit such as accounting estimates. The research is naturally limited by the chosen research methods applied, and thus the findings are based on the perspectives of the experts from the auditing industry. The originality of the thesis is ensured by providing the practical example of the implementation of blockchain technology in the audit process, which is a lack in the current literature on the topic.