Audit controls require human oversight at the managerial level. Those with access must be trusted not to circumvent the internal controls to commit fraud. Historically, it’s known that fraud happens. Financial statement fraud may not account for the highest instances of fraud. When it does happen though, it has a significant impact on the organization affecting all stakeholders involved.
Forward-looking enterprises looking to attract investment must be confident in the accuracy and legitimacy of their financial statements. Internal controls are only part of the trust establishing process.
A 2016 report by the Association of Certified Fraud Examiners discussed different types of fraud. The analysis identified financial statement fraud to account for the highest monetary loss.
“...occurring in less than 10% of cases but causing a median loss of $975,000.”
External auditors do analyze the data incredibly well to identify irregularities in accounts, even though fraud detection is not the primary responsibility of external auditors. It is a time-intensive process and one that is costly for any organization. Moreover, it’s only done once a year in the majority of small businesses. Only the largest businesses have audit functionality that is operating to perform real-time auditing.
Even though the accuracy of the financial statements is the responsibility of the management of the company, identifying the remaining inaccuracies or control weaknesses still rests on the skillset of an independent auditor, and once again, a high level of trust is placed in their assessment.
Removing the Time Lag to Eradicate Financial Statement Fraud
Financial statement fraud often requires time to prepare. Service Organization Controls (SOC) audits are only required, in most cases, annually. The time lag is an incentive to misrepresent data. Real-Time financial reporting removes the time lag, thereby significantly reducing this opportunity to falsify financial data.
Investor confidence can be raised, auditors’ workload eased, and the financial position of enterprises can be proven with certainty.
Disruptive technologies are making waves in a variety of sectors. Now is the time for the financial world to take notice. Auditchain, the world’s first and founding member of DCARPE™ - Decentralized Continuous Audit and Reporting Protocol Ecosystem - is developing a new age technology that will allow the generation of the financial information, audit opinion, as well as a variety of other reports to the stakeholders, such as SOC certification, possible in real-time. The proposed technology will convert the quarterly and annual process to one that can generate audited financial statements at any time of year. With the time lag removed from the auditing process, stakeholder confidence will be increased sharply.
Financial reporting is about to change and the stakeholders will be able to benefit from real-time reporting, as the audit will become real-time functionality.
21st Century Businesses: Before It’s An Issue!
Auditchain is proposing the real-time financial reporting, decentralization and automation capabilities suitable for 21st Century Businesses, a level above beyond traditional financial statements reporting process.
One of the first expected applications of the product might be automation of crypto securities financial accounting: For example, there are companies that raise investment via token sales (known as ICOs) for digital currencies that may be sold at a later date. Depending on the scope of an ICO, it may be classed as securities and subsequently be required to comply with federal securities laws. Our solution may help companies fully automate their business cycle.
Auditchain is making it possible for any type of business, digital or traditional, to ease the strain of regulatory compliance and the work that auditors do to ensure financial data is represented fairly, but moreover, accurately.
Invest in the future of blockchain auditing that increases the ability for detecting error and fraud. Buy Tokens Now. Visit Auditchain.com.