Role and responsibilities of internal audit function are likely to expand in important ways with increasing acceptance of blockchain applications in organizations. Internal audit managers need to adopt appropriate methods to validate the functioning of blockchain networks and whether ledger versions are updating properly at all ends with appropriate security consistently.
Performing internal audit in blockchain environment will require a good technological expertise of internal auditor.
The internal auditor may find challenged to adapt quickly \u2013 but seeing the opportunity to take a leadership role in helping their organizations absorb and apply this new technology. Internal auditor can help entities in preparing for blockchain adoption.
Irrespective of the applications used, the blockchain implementation requires something more than technological expertise. There is need for documenting business case for blockchain, demonstrating superiority of blockchain over traditional database; potential cost savings; revenue enhancements; and identifiable enhancement in control and compliance environment.
Internal audit\u2019s association in implementation stage shall focus mainly on concerns pertaining to governance, security, audit policies and procedures, and other risk management and control issues. The extent of internal audit\u2019s involvement would depend on usage of blockchain technology developed internally or adopting the technology from third-party sources. <\/p>\n\n\n\n
There are four angles to focus for\neffective internal audit in blockchain environment:<\/p>\n\n\n\n
1.Resources and human capital<\/strong><\/p>\n\n\n\n Blockchain\nadoption will require certain adjustments in human and organizational resources\nneeded for internal audit to continue meeting its responsibilities. <\/p>\n\n\n\n For blockchain\nadoption, internal audit managers would be recruiting candidates with certain\ntechnical skills such as coding or cybersecurity, in addition to understanding\nof internal audit or accounting and finance. Till the time these resources are\nadequately available, the use of outside firms with specialized skills may\npitch in to fill the gap in availability of duly skilled resources.<\/p>\n\n\n\n Since blockchain\ntechnologies are still emerging, no single or mix of specialties is ideal for\nevery organization. Thus, there is always a challenge of engaging the best\ntechnology may become redundant shortly. Thus, a regular orientation toward\ntechnology \/ advanced analytics may be effective for current and future\ninternal auditors as business processes become increasingly automated.<\/p>\n\n\n\n Internal audit\nmanagers should continue to recruit people with sound critical thinking and\nproblem-solving capabilities and strong communication skills. Specialized\ntraining on the specific blockchain application would be required for new hires\nand existing staff in internal audit.<\/p>\n\n\n\n 2.Risk identification<\/strong><\/p>\n\n\n\n When preparing\nfor blockchain adoption, accurate and thorough identification of risks is an\nessential starting point. Specific risks associated with technology will vary\nfrom one use to other. However, certain risk areas would be applicable to most\nblockchain implementations. These include:<\/p>\n\n\n\n It is necessary\nto address the risk emanating from network complexity as:<\/p>\n\n\n\n [This list is only a starting\npoint as the purpose of this discussion is not to produce an exhaustive risk\nidentification checklist, but rather to point out certain types of risk that\ncould be considered unique to blockchain technology. Complete risk assessment\nfor blockchain adoption would necessarily include the full spectrum of general\ntechnology related risks, with particular attention to cyber-security risk.]<\/p>\n\n\n\n 3.Control procedures<\/strong><\/p>\n\n\n\n At the time of\nimplementing a blockchain application, internal audit need to evaluate the\nprocesses, risks, and controls related to that application to validate that the\ncontrols are adequate and effective (as per their review and testing).<\/p>\n\n\n\n Certain control\nelements to be developed are:<\/p>\n\n\n\n 4. Risk management and mitigation<\/strong><\/p>\n\n\n\n Introduction\nof blockchain technology creates need for additional cybersecurity enhancements\nincluding: <\/p>\n\n\n\n Internal audit should have access to resources that are capable of evaluating the structure of blocks themselves to verify that they are indeed indisputable; have necessary cryptography features; functioning; and secure.<\/p>\n\n\n\n At a broad level,\npossible considerations for internal audit include:<\/p>\n\n\n\n Most organizations \u2013 particularly listed entities (or those answerable to large groups of stakeholders) \u2013would require auditing and reporting regularly to demonstrate that systems are functioning as intended. These activities also need to be incorporated into the long-term internal audit strategy and plan.<\/p>\n","protected":false},"excerpt":{"rendered":" Role and responsibilities of internal audit function are likely to expand in important ways with increasing acceptance of blockchain applications in organizations. Internal audit managers need to adopt appropriate methods to validate the functioning of blockchain networks and whether ledger versions are updating properly at all ends with appropriate security consistently.Performing internal audit in blockchain environment will require a good […]<\/p>\n","protected":false},"author":3,"featured_media":565,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_links_to":"","_links_to_target":""},"categories":[17,14],"tags":[19,134,18],"class_list":["post-562","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-assurance","category-general","tag-audit","tag-blockchain-technology","tag-internal-audit"],"yoast_head":"\n\n
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