With regulators around the world scrambling to get to grips with Blockchain tech could the technology itself, and continuous audit, be part of the answer?
When I spoke to Auditchain™ founder Jason Meyers this week, it felt a little like talking to blockchain royalty – once removed, anyhow.
Jason’s top team includes such luminaries as Dr. Stuart Haber, one of the co-inventors of Blockchain technology, who although cited three times in the original Bitcoin paper, denies he is Satoshi Nakamoto (but sometimes is teased and gets called that around the office); and Eric Cohen, one of the co-founders of the global business mark-up language; XBRL.
The Auditchain™ mission is continuous, transparent, real-time audit and “streaming financial statements”. If audit ‘as we know it’ is a snapshot, then this is a video! Tamper proof and consensus-based - external validation and analysis ensuring transparency and so cutting the scope for fraud.
After more than twenty five years in investment banking dealing with auditors and accountants, Jason set up a successful investment bank and raised capital at the time of the 2007/8 financial crisis – a great time to do so, with people who would normally be completely unavailable suddenly looking for work, and at a reasonable price.
Jason built a multi jurisdictional stock plan administration system that landed Facebook as a customer. Facebook represented the largest private wealth opportunity in history.
But after a conflict over accounting with FINRA when not even 100% transparent, forensic accounting could appease the regulator, Jason realised it wasn’t about the audit... and stepped away from the industry altogether to rethink his future. During this break, in around 2013, he did a huge amount of reading about Bitcoin and blockchain, and a lot of thinking about its potential use in accounting, audit and financial reporting.
He especially went deep into the science behind blockchain, to work out how the biggest transactions could avoid being hacked.
Jason’s ‘aha!’ moment came when he realised he was part of a rare breed of people who understand both the technology behind blockchain, and the ability to constitutionalize a monetary system.
The revelation was profound!
He began to write a paper proposing a decentralised continuous audit and reporting protocol ecosystem. And he realised that the more you explain such a thing to others, the more you understand it yourself. The more you can tailor your message, you sharpen your understanding. As we often say… you can’t keep a thing unless you give it away!
The aim of Auditchain™ is to crowdsource enterprise dataset validation, in much the same way as any transaction in Bitcoin is validated by hundreds of external validators. It becomes part of that blockchain and is immutable.
Change in the auditing landscape and increased efficiencies in the assurance world are inevitable, bringing changes to the role of the auditor. The biggest issue is always independence. But a consensus-based external validation of system and control as well as financial statement data will make transparency king - and slash the scope for fraud.
- In the US, the Securities Exchange Act of 1934 governs all corporate financial reporting.
- Jason has over twenty five years experience in investment banking, private placements, IPOs and restructurings, and a broad skill-set in financial reporting.
- Jason had a conflict with FINRA during which he found even 100% forensic transparency wasn’t enough to satisfy the regulator. He went deep into the science behind Blockchain, to work out how the biggest transactions could avoid being hacked.
- He knew the best use case for a blockchain had to be accounting, audit and financial reporting.
- If a score from a dataset comes out at, say, 70 to 80 out of 100, there is reasonable assurance that financial statements are presenting fairly – making the statement part almost an afterthought.
- Auditchain™ is running an ICO, with 160m of 250m tokens selling. There will be an airdrop of 42MM AUDT Tokens after the ICO, to punish flippers and reward long-term holders
- Jason urges all members of the investment, accounting, audit, financial reporting, technology and academic communities, to register with the Auditchain™’ affiliate entity The DCARPE Alliance, collaborating to encourage and adopt decentralized continuous audit and reporting protocol standards, using Auditchain.