PwC eyes blockchain opportunities and risks
PricewaterhouseCoopers is developing blockchain technology to help clients validate transactions as they deal with possible risks.
The past spring, PwC debuted a Blockchain Validation Solution to help authenticate transactions for clients. “We are doing the validation of the transactions, so we will do it as an operational service in a non-audit client,” said Vicki Huff Eckert, global and U.S. new ventures leader at PwC. “We will not do it as part of our traditional attest external audit business. The validation tool is really about the operational audit, the entire control framework around it, and how companies gain comfort with the transactions that are processed versus the actual financial validation and external audit of financial statements.”
Blockchain has been spreading beyond cryptocurrencies like bitcoin and ethereum to other applications for distributed ledger technology. Earlier this year, PwC surveyed 600 executives in 15 territories and found that 84 percent said their organizations have at least some involvement with blockchain technology. More than half the respondents reported blockchain research and development in progress, and 15 percent indicated they have live implementations.
PwC has published a white paper on blockchain governance describing Blockchain Risk and Control Framework to help companies identify risks before implementation begins and develop an audit trail for blockchain. The firm’s clients are using the Blockchain Validation Solution for purposes such as legal risk management and internal audits.
“It’s those teams that are trying to gain comfort around the activity that’s occurring on their proof of concepts, and we’re working with them on how they do it, using the tool and using the framework,” said Huff Eckert. “It’s a rules engine, so what we do is we will work with the company as they set up their blockchain environment. The scope is for permissioned exchanges, and we’ll set up a rules engine. We actually put a node on the blockchain to validate the transactions that are being recorded, so they will validate it based upon the rules to test to.”
For example, if four or five companies are supposed to be part of a particular blockchain environment for some type of digital asset, PwC will validate that the transaction is going to one of the five within that permissioned network. “We will actually put into the rules engine how to make sure that the company processing on there is in fact one of the approved companies, and that the transaction in fact has the same operational metrics, so it’s a real-time audit tool,” said Huff Eckert.
The firm sees blockchain as one of eight essential emerging technologies, including artificial intelligence, augmented reality, drones, internet of things, robotics, virtual reality and 3-D printing, with important implications for businesses today.
“We look at all eight of those as a team in my group and we are constantly thinking about how do they impact everything from audit to tax to our consulting business, and how are we leveraging those emerging technologies in what we do but also in how we’re engaging with clients,” said Huff Eckert. “We will think about how to use drones, as an example, in looking at inventories, or how to use augmented reality in training individuals.”
Blockchain with its distributed ledger technology has particular implications for accountants. “The concept of decentralized ledgers is something that I think is extremely disruptive, both opportunistically as well as challenging to the accounting industry, but I do think it’s something you’ll see more of,” said Huff Eckert. “What’s happening in the cryptocurrency space is really the digitization of financial markets, and the pace at which that occurs or does not occur will be also disruptive, not just in using new technology. But the ripple effect will be significant, so that’s why we’re watching it closely.”