Blockchain Audit

What is blockchain?

Blockchain technology is what allowed the creation of the Bitcoin cryptocurrency, and it is based on a set of protocols that allows storing and sharing information about transactions or digital events in a controlled and systematic way. Is a kind of general ledger that is distributed by each of the blocks that make up the system (whether it is Bitcoin, Ether, Solana or any other “cryptocurrency”) and that allows digital assets to be processed in real time and without being altered in the future.

The blockchain organizes blocks of information chronologically, encrypts them, and distributes them among many different parties. These blocks can only be used by consensus of the majority of the participants in the system, thus reinforcing the security of the information. In this way, if they have not been validated by the majority, the information does not become part of that accounting ledger.

It is important to note that the blockchain contains a certain record and each transaction is verifiable, as we will see below.

Audit blockchain

Being a totally new and disruptive technology, it is important that there is a good approach and understanding of the audit processes that will be carried out to audit these new processes that companies adopt.

Therefore, the first thing that should be done from the auditor's point of view is a meeting with the key people in the design and use of this technology within the company, to achieve a reasonable understanding of why and how to implement it. In this way, the processes carried out in the company can be drafted, and also risk and control maps can be prepared. This will be very relevant when testing the design and implementation of controls that mitigate the new risks associated with the blockchain.

The second step would be to plan and carry out the new audit tests. Whether through detailed tests or controls, it will be necessary to verify that all or some of the transactions carried out by the company have actually been carried out and that the amount and the date on which they have been carried out is the one registered by the entity. For this, the auditor may make use of platforms or web pages in which the different transactions are reported.

Blockchains are public, and this is very important for the auditor. Thanks to this transparency, the auditor will be able to verify that the transactions selected for its tests are correct and reflect an accurate picture of the assets. Some of the websites where you can check the different data of the transactions, using the hash code, are blockchain.com and bitinfocharts.com.

Internal Audit

As a company's third line of defense, it is important that the internal audit department understands and internalizes this type of technology within its functions, in the event that the company is going to use it. It is important to understand why the company is going to use blockchain, the processes that are going to be incorporated, the potential risks assumed and how each of them will be mitigated. This will enable the company, through its internal audit department, to better understand its processes and to be able to implement the blockchain efficiently and consistently with the rest of the systems that are currently in use.