World Continuous Auditing & Reporting Symposium
World Continuous Auditing & Reporting SymposiumBlockchain: From The Auditor’s ViewpointNovember 8, 2019
What is blockchain?Blockchain is to value, what the internet is to information hence, the Internet of Value[A distributed ledger which allowsdigital assets to be stored,transferred, and transacted in a realtime, immutable mannerCopyright 2019 Deloitte Development LLC. All rights reserved.]World Continuous Auditing & Reporting Symposium Blockchain: From The Auditor’s Viewpoint2
Blockchain is bigger than you thinkMarket spending growth on emerging technologiesInternetCloudAIBlockchainWorldwide blockchain spending is expected to reach nearly 16billion by 2023 (source: IDC).RPA450400Total Market Spend ( bn)350300Deloitte’s 2019 global survey of senior executives:Gartner forecasts that the business valuefrom blockchain will reach 360 billion by2026, surging to 3.1 trillion by 2030.56%250considerblockchain as atop 5 strategicpriority200150100Blockchain is only at thebeginning of its journey today 5040%01998200320082013201820232028will invest 5M inblockchain this coming yearSource: GartnerCopyright 2019 Deloitte Development LLC. All rights reserved.World Continuous Auditing & Reporting Symposium Blockchain: From The Auditor’s Viewpoint3
Benefits of blockchainCurrent stateCustomersBusinessesData siloGreater transparencyIncreased effectiveness,efficiency, and speedBlockchain stateCustomersShared blockchainBusinessesData standardizationData reconciliationCopyright 2019 Deloitte Development LLC. All rights reserved.World Continuous Auditing & Reporting Symposium Blockchain: From The Auditor’s Viewpoint4
What can a blockchain do?A blockchain is enabling technology for other business processesRecordKeeping Automated, high fidelity and low-cost mechanisms for record keeping The core mechanism is the maintenance and modification of adistributed ledger Requires user-specific “keys” only accessible by authorized usersTransferof Value A blockchain solution enables secure, near real-time, low-costtransfer of value Records can be transferred to other parties using the decentralizeddistributed ledgerSmartContractsCopyright 2019 Deloitte Development LLC. All rights reserved. Automate business logic Programmable to trigger transfer of value and information undercertain conditions Smart contracts can be developed, exchanged, and automaticallyexecuted on decentralized systemsWorld Continuous Auditing & Reporting Symposium Blockchain: From The Auditor’s Viewpoint5
A view of the blockchain ecosystemThe blockchain ecosystem can be described as a technology stack with blockchain at its core—supporting the layers; digitalassets, deployment services, blockchain-enabled solutions, and end users/stakeholders. Blockchain companies can operateat specific layers of the technology stack or across multiple layers.Enterprises acrossall industriesEnd users/stakeholdersBlockchain-enabled solutionsAsset management (funds,family offices, individuals, etc.)Large enterprise solutions(e.g., identity, supply chain)Deployment servicesIndustry consortiaData services &analyticsDigital assetsCloud ServicesCryptocurrencyBlockchainSecurity tokenDigital Exchanges(e.g., buy/sell platforms)EnablersPublic(e.g., ethereum, bitcoin)Permissioned(e.g., banking consortium)MinersNode operatorsValidatorsPrivate hostsAsset backed tokenEmployeesCustodial services(e.g., wallets)Utility tokenProtocolEquity holders/founders/VC/PEHardware Services(e.g., chipsets)Emerging disruptors(e.g., token platforms)StablecoinOf this technology stack, the original issuance andtransfer of Digital Assets has had the greatest impactto the audit profession so far. Potential impacts fromnew Blockchain-Enabled Solutions have only begun toemerge.Copyright 2019 Deloitte Development LLC. All rights reserved.World Continuous Auditing & Reporting Symposium Blockchain: From The Auditor’s Viewpoint6
We are seeing traction on transformational use cases from across industriesConsumer BusinessEnergy & Resources Digitizing warranties for improved management Preventing trade of stolen goods Distributing and trading in digital assets Leveraging blockchain for physical post-trade activitymanagement & reconciliation Digitizing the trade finance processes through integratedbanking marketplaceMediaManufacturing Verifying media authenticity Transforming phones to portable blockchain wallets Managing devices such as sensors Creating transparency and secure traceability ofmaterials Enabling machinery to autonomously manage servicetimes and supply schedulesReal Estate Transferring existing land deeds Migrating the land registry onto a transparent,immutable ledgerPublic Sector Managing registered IDs Creating secure voting platforms Time stamping of certificationsCopyright 2019 Deloitte Development LLC. All rights reserved.BLOCKCHAINFinancial Services Supporting seamless cross-currency transactions Facilitating direct peer-to-peer paymentsLife Sciences & Healthcare Preventing medical data forgery Tracing and preventing counterfeit pharmaceuticalsWorld Continuous Auditing & Reporting Symposium Blockchain: From The Auditor’s Viewpoint7
Potential benefits to accounting and auditingData standardization and transparencyFinancial Statement Preparation Continuous feed of structureddata Automate financial statementpreparation and reporting “Automate” counterpartyreconciliation Continuous monitoring Advanced analyticsCopyright 2019 Deloitte Development LLC. All rights reserved.Auditing Techniques Independent data extraction Real-time monitoring and exceptionreporting Memorialize evidence through timestamping on the blockchain Advanced audit analytics of publicdata scalable to multiple engagements Large training data for artificialintelligenceWorld Continuous Auditing & Reporting Symposium Blockchain: From The Auditor’s Viewpoint8
Unique digital risksFinancial riskTechnological riskLoss of digital assets due to cyberattacks on (or failure of) systemprotocol, networks, digital walletsand end points. Market demandfor reporting of real-timeinformation.Verification of transactions may beinterrupted by an unreliableblockchain protocol. A newframework of controls needs to beadopted by organizations.Operational riskRegulatory riskBlockchains may have complexidentity verification systems,including cryptographic keys. Lossor theft of keys can meanpermanently losing access todigital assets.There are unclear, evolving andvarying regulations acrossjurisdictions.Companies continue to strugglewith regulatory understanding andcompliance.Copyright 2019 Deloitte Development LLC. All rights reserved.World Continuous Auditing & Reporting Symposium Blockchain: From The Auditor’s Viewpoint9
Some areas of focus for auditabilityInternal control and IT environmentAssertions (Existence, Rights & obligations, Valuation)Audit toolsCustodianshipRelated parties and fraudAccounting/books and recordsIndependence considerations for consortiaCopyright 2019 Deloitte Development LLC. All rights reserved.World Continuous Auditing & Reporting Symposium Blockchain: From The Auditor’s Viewpoint10
Moving Copyright 2019 Deloitte Development LLC. All rights reserved.World Continuous Auditing & Reporting Symposium Blockchain: From The Auditor’s Viewpoint11
Questions?Copyright 2019 Deloitte Development LLC. All rights reserved.Living Our Strategy: Spotlight Webcast Series The powerful potential of blockchain12
This presentation contains general information only and Deloitte is not, by means of this presentation, rendering accounting, business, financial, investment,legal, tax, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as abasis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you shouldconsult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this presentation.About DeloitteDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, andtheir related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does notprovide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the“Deloitte” name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations ofpublic accounting. Please see www.deloitte.com/about to learn more about our global network of member firms.Copyright 2019 Deloitte Development LLC. All rights reserved.
consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this presentation. About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”),
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