What’s the first thing that comes to mind when you think about accounting? Papers, taxes, records, files – a range of important but boring and often tedious processes and procedures. For many business owners, keeping careful track of expenditures and income is a painstaking part of business management.
Worse yet, it’s a domain that easily falls privy to fraud: According to Accountingweb, a 2015 Cornerstone Research report shows that “accounting fraud cases, either alleged in securities class-action lawsuits or in enforcement cases brought by the US Securities and Exchange Commission (SEC), increased sharply over the past year, due in part to the agency’s heightened focus on accounting-related fraud.”
In its 2018 Global Study on Occupational Fraud and Abuse, The Association of Certified Fraud Examiners, (ACFE) asked “survey participants what percentage of revenues they believe a typical organization loses to fraud each year. The median response provided by these CFEs is that organizations lose 5% of their annual revenues to fraud.
“To place their estimate in context, if the 5% loss estimate were applied to the 2017 estimated Gross World Product of USD 79.6 trillion, it would result in a projected total global fraud loss of nearly USD 4 trillion.”
But this is all set to change. What if you could automate the audit and financial reporting procedures? How would this change the ways, the speed, and the accuracy of your assurance and disclosure? And how would that change the world?
The path to 360-degree disruption of organisations’ accounting procedures has already been paved. The trail now being blazed by pioneers is preparing to fly the flag of discovery until these new realms of expertise gradually convert streams of innovation into a pounding highway of the mainstream world.
As a world-first, Auditchain is developing a Decentralized Continuous Audit & Reporting Protocol Ecosystem: once launched, it proposes to automate the external audit process, cut down on fraud, and present real-time accounts reporting.
The blockchain-based technology platform will enable streaming of financial statements in real time, contemporaneous audit opinions, and reports and related analyses for stakeholders to be produced continuously for the first time. This holds the potential to eventually make traditional reporting methods obsolete.
It also aims to reduce the risks and re-establish the audit trail in today’s electronic environment.
In a survey conducted by the Auditing Standards Board, the second greatest source of emerging audit or attestation risk identified by respondents was related to auditing in an electronic environment, where all the entity’s transactions are electronic and there is no paper trail.
However, the groundbreaking Auditchain technology not only proposes new standards of transparency, data standardisation and accountability for financial reporting, but also improved security, substantially increased risk controls and greater assurance for stakeholders.
So how did all of this come about? And what was it that drove the Auditchain pioneers off of the supposed ease of the beaten path?
For Auditchain founder, Jason Meyers, the phrase ‘necessity is the mother of invention’ has never rung truer.
The answer to how he discovered blockchain and its use case within the accounting industry?
“Through beating my head on the desk for 30 years wondering how the hell such systemic problems can persist in such an innovative world,” he says.
“It wasn’t fun nor was it funny. I was an investment banker for almost 30 years. I had a war over an accounting with a rapacious regulator who drained every penny I had until I could not afford to fight anymore I was then forced to sign the worst agreement I ever signed.
“Bewildered, frustrated and in despair, I resorted to curating a parody of the regulatory establishment in the form of a giant 50-piece art exhibit of the board game Operation and called it Corporation.
“It featured a contrast between the centralized banking and regulatory system and the decentralized monetary system that is Bitcoin. I showed it in New York City. It got rave reviews.
“I held panel talks on blockchain during the second show and attracted some of the biggest celebrities in the space.
“The panel talks and the art exhibit put me in the middle of the blockchain establishment. During the exhibit, I had my Ah-ha moment when I realized what blockchain could do to reduce regulatory conflict and disrupt accounting, audit and reporting. It was actually the best use case for a blockchain while everyone else was indulging the craziest time for ICOs.
“I began writing a paper titled Decentralized Continuous Audit & Reporting Protocol. I paced around the kitchen for almost 6 months. I wrote a paragraph; paced around the kitchen; lather, rinse, repeat.
“I finally approached Rutgers University’s Continuous Audit Lab and sent an email off to the head of the Lab for a sanity check to see if I was crazy.
“They were very impressed and invited us to present at the 40th World Continuous Audit and Reporting Symposium at Rutgers in Newark, NJ. I told them I wasn’t a CPA or an auditor, that I was a 10th grade dropout. They laughed and were not surprised.
“We presented at 40WCARS; a two day event. I didn’t plan to go the 2nd day but somehow, I ended up there. That’s where I met Eric Cohen who presented that day on audit and audit data standardization. Eric co-created xBRL which is a standard business mark-up language used in most regulatory jurisdictions around the world, including HMRC and the SEC,” says Meyers.
“I asked him on the spot to join us and he did! I then met Dr. Stuart Haber who, with Scott Stornetta, invented the data structure now known as blockchain in 1991. They are cited in references 3, 4 and 5 of the original Satoshi Whitepaper.”
Dr. Stuart Haber says: “Assuring the integrity of business records was the intention of my early work with Scott Stornetta back in 1990.” To him, bringing blockchain to the accounting industry; “Represents the completion of the original vision we had during that early work.”
So, with an all-star team and a blockchain-driven plan to create permanent and global disruption within the audit profession, Meyers has laid a solid foundation to exacting his vision of change.
Auditchain is deploying a decentralized continuous audit and reporting protocol ecosystem using a public blockchain and a block explorer that renders streaming financial statements under continuous audit.
It will enable the automation of the external audit function by enabling enterprises to raise the level of audit evidence using a blockchain.
This offers solutions to some of the worst nightmares in the global capital markets, reducing problems including accounting conditionality, manipulative practices, earnings subjectivity and the possibility of fraud.
“We are also enabling auditors to be more independent and less subjective,” says Meyers.
The Auditchain economy will be powered by the AUDT Token. Auditors will be paid AUDT rewards for providing standardized levels of assurance. Premium levels of assurance will be requested and paid by enterprise users through a library of engagement contracts as well as through subscriptions from enterprise data consumers.
Consumers will use AUDT Tokens for subscriptions for access to more granular detail that comprises Streaming Financial Statements, audit analytics as well as sector-based analytics and macro-economic reporting.
Enterprises can contribute computational power back to the network, which can substantially reduce net assurance and reporting compliance costs.
Auditchain is holding a private sale for early adopters to buy AUDT tokens for future staking and usage. The company will also be conducting a Token Generation Event which comes with a unique Airdrop designed to additionally reward early, long-term adopters who hold AUDT Tokens.
250,000,000 AUDT will initially be launched on the Ethereum network and Auditchain plans to Airdrop up to a total of 42,685,996 additional AUDT after the Token Generation Event. The Airdrop will reward those that hold AUDT and do not move or sell them – it’s being referred to as a Proof of HODL Airdrop.
Meyers says expansion plans involve its affiliate, the DCARPETM Alliance, which is a coalition of members of the entire accounting, audit and financial reporting supply chain.
The potential for Auditchain’s market growth spans a $495 billion per year business – the entire accounting and audit supply chain: “Our goal is to convince every public auditor to join the network and earn AUDT by providing external validation of enterprise data sets in the same way that external validators validate a Bitcoin or ETH transaction,” explains Meyers.
So, what began as one of life’s worst trials has turned into a stepping stone and the bedrock of Meyers quest for the Holy Grail of innovation and global transformation of the assurance industry.
“It has since been an incredible journey in an ever-widening circle of goodwill that wakes me up every morning, if I sleep,” he says.
“I am no longer angry at regulators nor am I resentful at the status quo. I gleefully wake every morning to bring my Ah-ha experience to reality.”