The Blockchain-technology: An Exploratory Research of how the Key Principles behind the Blockchain-technology Can Revolutionize Operations of Finance and Audit Functions

Jeanette R. Kaufmann & Nicholas J. Kaufmann

Student thesis: Master thesis


Blockchain is a revolutionary new piece of technology, about which the general public knows very little. The technology has the capacity to completely transform certain industries, due to its values of security, verifiability and immutable, distributed ledgers. Blockchain decentralises processes, which are currently reliant on the use of intermediaries, while at the same time providing security in an era of increased awareness of cyber-crime. The technology has been around for a number of years but was officially made relevant when a persona named Satoshi Nakamoto proved its application in the form of the Bitcoin cryptocurrency (Nakamoto, 2008). Rather than having a central organisation like the European Central Bank control the flow and value of currency, Nakamoto thought to distribute the management of currency to the users of the currency. To ensure that users do not illegitimately abuse this principle, Nakamoto developed the Bitcoin Blockchain in such a way, that certain users of the Blockchain - called Miners – independently verify transactions involving the currency and are rewarded for their work. At its core, their work ensures that a Bitcoin - just like a real, physical currency - cannot exist in more than one place at a time. The Bitcoin transactions are pooled together in batches called Blocks, and each block is cryptographically linked to the Block of transactions preceding it, all the way back to the very first transaction, that has ever occurred. Thus, the term “Block-Chain” or Blockchain came to be. A core benefit of the Blockchain is that all transactions are public, and anyone can verify any transaction that has every occurred on the Blockchain. Together, the aforementioned precautions and safety measures ensure that the Blockchain is impenetrably secure and resistant to tampering. This thesis gives a more detailed overview of the technology and its benefits and differences compared to current systems. The potential applications of the Blockchain technology go way beyond those of cryptocurrency. Two of the industries that are especially ripe for innovation and could benefit immensely from the aforementioned advantages of Blockchain are the accounting and auditing industries. These trades both rely on practises which are several centuries old, many of which depend on the reliability of intermediaries. However, in a Blockchain-based world there will no longer be a need for intermediaries to verify the occurrence of transactions and events, as these are recorded on public Blockchains, which are maintained by miners. This thesis therefore challenges these century-old practises by examining the possibilities for implementing Blockchain into the enterprise reporting and auditing processes. The thesis provides a framework for implementing Blockchain into the reporting process called Triple-entry accounting, which in turn improves the “auditability” of the enterprise in audit. Further, the thesis studies how Blockchain may implicate the processes of the auditor. The conclusion is generally, that the topic of Blockchain is under-explored by both the accounting and auditing industries. The thesis assesses that the Blockchain technology can streamline many enterprise processes as well as the procedures of the auditor, while providing the users of financial reporting with a more comprehensive and trustworthy output. Lastly, the thesis provides examples of how the role of the auditor may look in a Blockchain-based economy. The result of this shows that the role and importance of the auditor will not diminish but evolve with the technology

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2018
Number of pages132