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Audit And Blockchain: A Productive Collaboration

13 February 2019 14:20, UTC
Audit And Blockchain: A Productive Collaboration
By Aleksandre B

In 2018, the audit companies from the "big four" offered comprehensive solutions in the sphere of blockchain technology almost simultaneously and announced new cooperations with other players in the crypto market. It looked as if solid businessmen could not hold themselves away from the crypto hysteria at the end of 2017 and invested in the development of their own products. But due to the production time, the ready-made solutions arrived at the moment when there was no trace of the former enthusiasm: the cryptocurrency rates had dropped significantly, and the market was cooling off from the hype.

The Big Four of the world audit and their blockchain solutions

However, this assumption is wrong, and some facts are refuted. For example, KPMG announced the launch of Digital Ledger Services in cooperation with Microsoft back in 2016, and Deloitte partnered with DNV GL to launch the blockchain-based solutions in 2017. So let's take a closer look at the leaders of the professional audit market and what they are up to in the sphere of blockchain.

KPMG, the Swiss-Dutch cooperative

KPMG has its headquarters in the Dutch Amstelveen and is registered in Switzerland. The form of ownership is cooperative with many independent offices in different countries. The company provides three types of services — management consulting, taxes and audit. The founding date of the company in its current form is considered to be 1987, but its history begins in 1870 when accounting firms William Barclay Peat & Co and Thomson McLintock were established.

In 2016, KPMG presented a solution to facilitate the introduction of blockchain technologies in cooperation with Microsoft. The basis for this project was the Microsoft Azure service. In February 2017, KPMG, still collaborating with Microsoft, announced Joint Blockchain Nodes — special workspaces in Frankfurt and Singapore, which were designed to present and test the blockchain technology implemented in real business processes.

In September 2018, a new milestone in blockchain study was achieved: “The experimentation phase for blockchain is coming to a close with companies now embarking on the execution phase.” In this regard, KPMG presented a new managing team: Arun Ghosh, KPMG U.S. Blockchain leader; David Jarczyk, KPMG U.S. Blockchain Tax leader; Erich Braun, KPMG U.S. Blockchain Audit leader.

As it became clear from the statements of Arun GHOSH, currently, KPMG gives priority to the sphere of commodity markets. The wealth of experience, a rich knowledge base and expertise in local and international aspects of the goods’ movement are the reasons behind this decision. Knowledge of taxation, regulations and distributed registry technology also apply to this fact. The company will implement blockchain solutions that significantly simplify the operations for enterprises with complex production and logistics chains.

Deloitte — the leader in audit and consulting since 1845

This organization has the form of a community of independent offices — legal entities operating in different countries, complying with relevant laws and local regulations. Deloitte was founded in 1845 in the UK by William Welsh Dellois (Deloitte). The name of the founder is a famous brand in the field of auditing nowadays. Deloitte's areas of activity are audit, financial consulting, taxes and law, as well as the risk management. Its clients are public and private organizations in various industries.

In September 2017, together with the DNV GL company, Deloitte launched the world's first solution for digital storage of certificates on the blockchain. Next, in July 2018, the company started a blockchain expertise center called BlockCenter which was based in Deloitte Netherlands office. About a hundred experts in the field of programming, auditing, taxes and financial consulting joined it.

In January 2019, Deloitte started publishing a series of documents called “An internal auditor’s guide to auditing blockchain”. The document describes the features of the technology and the risks of its application.

Shortly after, in February, Deloitte, together with Kerry Logistics and CargoSmart companies, announced the successful collaboration. They managed to combine several distributed ledgers on one platform to improve the freight management system. The report says that the development of the system was completed in December 2018, after which it was successfully implemented into the global trade and finance structure.

Deloitte Digital Talks will take place in February — the event with the theme of blockchain in the real economy, with the aim to discuss the potential of blockchain and the options of its introduction into business.

EY — a brief name and a strong business

Ernst & Young is a network of independent legal entities with offices in many countries of the world. The company was founded in 1849 in England, known as the Ernst & Young since 1989, and EY rebranding took place in 2013. EY works in the fields of insurance, audit, consulting, taxes and law. The organization has about 700 offices in 150 countries.

In August 2017, the company announced an integrated mobile blockchain platform called Tesseract, a solution for the autonomous vehicles market.

In April 2018, the new product of EY was announced — Blockchain Analyzer. This service is developed to help enterprises examine blockchain solutions. In particular, it provides the ability to collect, store and organize data from numerous distributed ledgers. Blockchain Analyzer is to be used by the company's audit teams when working with enterprises that have implemented or intend to implement blockchain solutions.

In June 2018, EY and Microsoft presented a product for managing intellectual property and digital assets. With the help of this blockchain platform, media companies and entertainment industry enterprises will be able to control their intangible assets.

In October, EY introduced a new blockchain solution, EY Ops Chain Public Edition (PE). The system of transactions within the Ethereum public network allows keeping fully private access to operations. The product developed by the company uses a zero-knowledge proof tech — a method that allows the parties to verify its implementation without disclosing the content to each other.

PwC — second to Deloitte

PricewaterhouseCoopers, operating under the name PwC since 2010, is an international network of individual legal entities from different countries. The HQ of the organization is in London. PwC's business profile is insurance, financial auditing, consulting, taxes, and data analysis.

27.07.2018  |   in Innovations
In March 2018, the company announced the development of blockchain audit service for companies that concern this technology and look for reliability and security tests. As part of this service, PwC offers a comprehensive program for implementing blockchain technologies for its customers. The program contains a study of the requirements for functionality and business characteristics; design, development, testing of blockchain solutions; integration and management of solutions offered by third parties, etc.

In March 2018, PwC partnered with Request Network to, develop and research of blockchain technology opportunities for business. In November of the same year, the company announced its partnership with the Cred service, an online loan platform that issues its own tokens. The purpose of business collaboration is to attract new customers to the crypto market. The Cred Foundation provides stablecoins backed with US dollars.

Are there any blockchain auditors outside the Big Four?

It can be assumed that only the leaders of the audit market are interested in control, adaptation and assistance of the blockchain implementation. However, this is not true. Let’s take a look at several smaller companies providing similar services to their customers.

Elliptic

Elliptic is hardly a small or growing company. This is a reliable and respected company from the UK, it attracts the attention of investors and receives awards for its innovative developments. Elliptic is active in data analysis, investigation, detection and prevention of crimes and illegal operations in crypto networks and blockchain companies. The company offers several products:

  • an audit of compliance with the AML standards — the laws against money laundering;
  • forensic audit — investigating transactions, identifying unofficial links, partners and stakeholders based on a study of DLT;
  • the support and improvement of financial crime investigators — Elliptic participates in such cases, using its intelligence services and experience in studying cryptocurrency and blockchain projects.

Coinfirm

This company presents itself as the global leader in the field of Regulatory Technology (related to financial regulations) for digital currencies and blockchain-based financial systems. The company has four offices: in London, Warsaw, Turin and Tokyo.

Coinfirm services are:

  • investigation of crypto AML legislation violation risks, analysis of public data of DLT, transactions’ study and comparison with patterns and schemes of illegal actions;
  • development of solutions that comply with the principle of KYC — one of the main requirements of financial regulators;
  • Trudatum — confirmation of rights to a digital asset;
  • AMLT-Network — Coinfirm network, which uses a company's own token (AMLT-token) for transactions between the clients;
  • The AML KYC Compliance Framework is a business solution that combines all of the products mentioned;
  • Fraud Investigation allows to identify the movement and sources of stolen capital through the monitoring and comprehensive analysis;
  • blockchain analysis, an expert study of the blockchain projects’ performance;
  • service of advisors and consultants.

FP Complete

This US company received an investment of $1.2 mln at the very start in 2012 already. FP Complete is known for its tutorials and the Haskell programming language development. In addition, the company's engineers conduct an examination of blockchain-based solutions.

FP Complete specializes in technical aspects of blockchain projects audits: code analysis, documentation assistance, project management, and quality assessment of the made product.

Customers are provided with three tariff plans, according to which the company's specialists work on project auditing: Bronze (40 hours per month), Silver (80 hours per month), and Gold (160 hours per month).

Why do auditors need blockchain?

Why is the Big Four so active after the market downturn? Perhaps, the monsters of audit simply missed the train the ICO boom and blockchain-fever. There are other versions, though. Jeanne Boillet, the leader of Global Assurance Innovation at EY, was right when she told the Financial Times that her organization simply had no choice — many customers were involved in the crypto and blockchain market.

No doubt, the thesis from the press releases are true: blockchain is the future of the economy, and now, after the experiments are through, the time has come to introduce serious implementations on a global scale. These companies, both large and small, are doing an important thing — they work hard to make blockchains and cryptocurrencies become an essential component of business and modern world.

Image courtesy of Bitrates



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