Jeanette M. Franzel, a board member of the Public Company Accounting Oversight Board (PCAOB), a nonprofit organization established by Congress to oversee the audits of public companies, recently noted that Blockchain technology could drastically enhance, optimize and improve financial reporting and auditing.
The statement was made at the 16th Annual Financial Reporting Conference in New York.
The PCAOB, which is supported by the Congress and the US government, is actively looking into emerging innovative technologies such as robotics, artificial intelligence (AI) and Blockchain to overhaul current systems used by auditors and other organizations in the finance sector to share, store and secure information.
“Certain technologies, such as robotics, artificial intelligence, and distributed ledger technologies, also known as blockchain or distributed database technology, have the potential to disrupt markets and information sharing, which could also cause disruption to financial reporting and auditing processes.”
While Blockchain technology possesses the ability to significantly reduce operating costs, optimize auditing processes and cut verification periods with a real-time, transparent and unalterable ledger, Franzel emphasized that Blockchain in the field of auditing will be most useful in improving audit quality.
Pilot tests ahead
In the upcoming months, the PCAOB will fund various interdisciplinary initiatives to evaluate technologies that could be used to raise auditing standards and inspections. The Blockchain is one of the three technologies the PCAOB is investigating and the organization plans to implement the technology in the near future to run pilot tests.
“We currently have a number of interdisciplinary initiatives underway at the PCAOB to study and evaluate the implications of new audit innovations and technologies on PCAOB auditing standards, inspections, and oversight generally, so that we will be well poised to meet these challenges as they arise.”
AI could potentially be another important technology for the PCAOB and other commercial corporations in the finance sector.
Most recently, US banking giant JPMorgan successfully implemented a program called COIN, which is short for Contract Intelligence, to complete 360,000 hours of work within a few seconds. According to the developers of COIN, the program also allowed JPMorgan employees to spot mistakes in their contracts or loans accurately before processing.
During a presentation of its program, the bank said:
“We have invested heavily in technology and marketing -- and we are seeing strong returns.”
The efforts of organizations such as the PCAOB and JP Morgan, which are both actively investigating the potential of Blockchain technology in the finance sector, could also lead to the development of a joint AI and Blockchain platform, in which organizations and companies can process audits, transactions and other financial operations with reduced costs and security risks.