Smart financial audits on the Blockchain — Request Network’s yellow paper about financial audit
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Request Network is a decentralized network for payment requests, there are 5 use cases and one of them is about audit & accounting. Here is our yellow paper about this part.
We’re still in the early days of understanding what Blockchain can do, but the long-term potential of the technology is huge. Especially for the finance world, with a significant number of possibilities in the accounting and audit industry. It has the power to revolutionize the way we audit a company today.
The financial audit that we know is far from being an easy job both for the audited company and for the auditor. From the data collection to the multiple reconciliations to an understanding of the accounts it is a long, manual, fallible, and expensive process. Built on the Blockchain, Request Network introduces the concept of smart audit with algorithms that verify transactions in real-time, detect irregularities, consolidate accounts, and raise potential mistakes by providing the algorithm with your verification key.
With Request and the endless applications of the Blockchain, it is our hope that accounting and auditing practices will change.
The system allows a unique and immutable ledger. Thanks to the interoperability and decentralized nature of the Blockchain, multiple parties can read or write on the ledger. An invoice isn’t recorded anymore in two independent accounting systems but in one universal ledger verified by everyone. Imagine the impact of such a system on the management of intercompany transactions of an international group.
We’ll see the emergence of the triple-entry accounting system (with the digital signature, the invoice becomes the transaction) and the time stamping system (basic blockchain function that permanently registers the time that a particular action took place on the block).