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SUMMARY: This article summarizes "Tracking Tangible Asset Ownership and Provenance with Blockchain" (Sheldon 2022), which introduces auditors to the risks of using blockchain's shared repository to track assets in the physical world. The underlying challenge is keeping the status of tangible assets aligned with their digital representations on a blockchain. In response, the summary focuses on the parties, technologies, and processes that make this task complex. The summary begins with an overview of how blockchain can be used to track tangible assets, then discusses four stages of tracking tangible assets with blockchain: (1) design and governance of a blockchain, (2) asset creation, (3) asset transfer, and (4) asset retirement. Based on the risks highlighted in these four stages, the summary presents a framework of risk considerations and control objectives that auditors can use to evaluate the extent to which a blockchain serves as a reliable repository for tracking tangible assets. [ABSTRACT FROM AUTHOR]

Blockchain consortia offer firms several advantages, including the ability to maintain a shared transaction ledger that is secure, verified, and agreed-upon by key business partners. While these benefits are largely derived from blockchain's distributed architecture, this same architecture poses challenges to auditors working to provide assurance on a technology owned, operated, and maintained across several firms' borders. Indeed, participating in a blockchain consortium transitions a firm from relying solely on its own IT infrastructure and processes, to being vulnerable to how other firms collectively maintain the shared ledger. As blockchain consortia grow and are used to process and record material transactions, members will require assurance that other members maintain the blockchain in a well-controlled manner. Given the complexities of auditing a distributed environment, this study proposes three design choices intended to improve the auditability of consortium blockchains. Practitioners then evaluate these designs and offer additional considerations/alternative paths forward. [ABSTRACT FROM AUTHOR]

Blockchain transactions are recorded in a shared and append-only repository that multiple parties verify, validate, and agree upon. While initially used to keep track of digital assets, blockchains now track the ownership and provenance of tangible assets. An inherent challenge in using blockchain for this task involves keeping the status of a tangible asset in the physical world in sync with its non-fungible token on a blockchain. While several blockchains are already being used in this manner, specific implementation details are fragmented. In response, this study examines four stages of tracking tangible assets using a consortium's permissioned blockchain, including: design and governance of a blockchain, asset creation, asset transfer, and asset retirement. Based on this analysis, this study proposes a framework of risk considerations and control objectives to evaluate the extent to which a unique blockchain serves as a reliable transaction repository for tracking the ownership and provenance of tangible assets. [ABSTRACT FROM AUTHOR]

Blockchain brought about the potential for improved data reliability, but only when those data are the result of transactions that happen completely within a blockchain. The reliability of blockchain data is threatened when information is introduced from the outside world, such as when oracles are used to observe occurrences and provide this information to smart contracts. This specific threat to the reliability of blockchain data is known as the oracle problem. This study offers a working definition of blockchain oracles and argues that they should be viewed as service organizations under the auditing standards from the AICPA and PCAOB. The study then discusses risks associated with the oracle's function of collecting, storing, transforming, and transmitting information, and proposes control objectives for auditors to consider when evaluating the information provided by oracles. Finally, the study closes by discussing open questions the audit profession still needs to address with the oracle problem. [ABSTRACT FROM AUTHOR]

This case examines auditing implications of Bitcoin and blockchain, and is intended for either undergraduate or graduate auditing and assurance courses. Students are asked to engage in aspects of planning and risk assessment for the audit of an online retailer. The case provides an interesting setting in which to achieve the learning objectives of: (1) identifying risks of material misstatement, (2) linking risks of material misstatement to relevant financial statement assertions, (3) explaining changes in audit procedures for responding to risks, (4) understanding a financial statement auditor's use of service auditor reports, and (5) understanding management specialists and the role they play in an audit. The modular case can be used for in-class discussion or as an out-of-class assignment and requires minimal advance preparation by the instructor. The case may be assigned in part or in its entirety. Student responses indicate the case is interesting and offers a positive learning experience. [ABSTRACT FROM AUTHOR]

SUMMARY: A perennial challenge in the accounting profession is how to aggregate and share instances of practitioner misconduct among numerous relevant parties. At present, both the American Institute of Certified Public Accountants (AICPA) and National Association of State Boards of Accountancy (NASBA) offer solutions for centralized collection of misconduct, but both likely experience issues with incomplete reporting from key constituents. I propose a novel use of blockchain technology to address this issue, such that all key parties in the accounting profession leverage an accountancy blockchain to aggregate and share instances of practitioner misconduct across the country on a nearly real-time basis. Such a network creates an immutable record of misconduct and allows key constituents in the accounting profession to work together and share information as peers without the risk of one party taking control of the ledger. I close by discussing blockchain-specific roadblocks to realizing this proposed model. [ABSTRACT FROM AUTHOR]