Blockchain assurance services
Creating a more efficient, insightful, and controlled finance function
Blockchain has the potential to transform the finance function across all the core accounting processes, from procure-to-pay to reconciliations and even payroll, making them more efficient, effective, and secure. But how will you know if the data and requirements across all your processes are functioning appropriately, behaving as expected, and providing accurate outputs into your company’s financial and corporate reporting?
What processes can blockchains improve?
Blockchain and smart contracts have the potential to radically reshape accounting processes. With ever-increasing demands from stakeholders, blockchain technology can help reduce and streamline the workload associated with reporting cycles and period ends by producing self-validating sub-ledgers for receivables and payables, order-to-cash and procure-to-pay, and even payroll.
Automating and securing these repeatable and time-intensive processes can enable finance teams to shift their time and attention from routine, transactional tasks to higher-value work that aligns with the strategic priorities of the organization.
Some potential benefits blockchain can provide include:
- Reduced time and workload for finance talent
- Shift of finance’s strategic focus toward high-value work like prediction and analysis
- Peace of mind that the data and controls across your accounting function are accurate
Will smart contracts replace the need for legal agreements in the future?
In a Deloitte survey1 completed with MIT Technology Review, 70 percent of respondents said smart contracts will complement, not replace, legal agreements. The need to ensure that smart contracts adhere to the off-chain versions (traditional legal documents) is critical.
Smart-contract assurance can address part of this fundamental issue up front before the transaction executes. Given that smart contracts is a misnomer and they are neither smart nor true legal contracts, it will be crucial for organizations considering using blockchain to thoroughly understand what the execution of a smart contract will look like.2
Blockchain assurance services
Deloitte is uniquely positioned to address the concerns of blockchain consortium participants and internal stakeholders across your organization.
Accounting standards and finance controls: Evaluate the information coming from the blockchain and how the smart contracts affect financial controls and reporting for each participant.
Internal controls: Assess gaps in existing smart contracts to meet required controls and assurance requirements, and develop a plan to address solution gaps, regulations, and compliance.
Ongoing assurance: Provide assurance on data quality and confirm blockchain fits into your financial reporting as expected. Auditor-node technology is used as an observer of the blockchain, verifying how the network is performing and identifying issues as they arise.
Business reporting: Deliver a detailed report on the validity of the smart contract and its outputs.
Blockchain in action
Imagine you have a simple contract with two conditions for work being done at a job site: first, a site supervisor signature is required to verify the work has been done, and second, a confirmation is required that the equipment used in the job has arrived at the worksite.
Today, to process payment for an invoice related to this job, you would likely have your supplier submit its invoice to you through your payment portal. It would then route through an internal workflow with a number of levels of review that check that the two conditions have been met before being sent back to accounts payable, which would process the invoice for payment. And if you don’t use electronic funds transfer (EFT), you have the additional step of circulating the approved invoice to the cheque signers with the backup that shows the two contract conditions have been met and all the levels of review have been completed.
This process currently takes about 45 days in total, on average, before the supplier is paid.
In a blockchain world, the process looks radically different:
- The site supervisor signs that the work has been done with his/her smartphone or tablet, resulting in a requirement being validated and recorded on the blockchain.
- The radio frequency ID (RFID) tag on the equipment required to be on-site broadcasts to the Internet of Things (IoT) sensor that records the equipment’s arrival and sends this condition to the blockchain.
- Given that the two conditions have been met, the smart contract executes, and the payment is automatically sent for processing through your bank.
- The transaction is recorded immediately and immutably on the blockchain, and the payable is recorded.
While most people may not be comfortable without some level of human review, with blockchain, multiple levels of review and approval can be removed, no payment portal is required, and the transaction can be recorded without human processing, decreasing both the strain on the accounting team and the possibility of human error.
Blockchain assurance enables you to be confident that recording your business activities with blockchain continues to meet internal controls and financial reporting requirements. To have a deeper discussion about blockchain and the transformative potential it could hold for your organization, please contact the person noted below:
1Deloitte, The Business of Blockchain, April 2017, https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Audit/gx-audit-MIT-blockchain-survey-infographic.pdf.
2Deloitte, Blockchain: Legal implications, questions, opportunities and risks, March 2018 https://www2.deloitte.com/global/en/pages/legal/articles/2018-legal-blockchain.html.