06/05/2022
๐๐๐ข๐๐๐๐๐๐๐ก & ๐๐๐๐ฅ๐ง๐๐ฅ๐๐ ๐๐๐๐ข๐จ๐ก๐ง๐๐ก๐ง
This article showcases Blockchain as the emerging technology which will soon have significant influence on the CA profession and the office of the CFO in the near future. It gives a perspective of how the professionals will need to up skill and prepare themselves to embrace the new technologies that will define the future of finance.
๐๐น๐ผ๐ฐ๐ธ๐ฐ๐ต๐ฎ๐ถ๐ป ๐ถ๐ ๐ฏ๐ฒ๐น๐ถ๐ฒ๐๐ฒ๐ฑ ๐๐ผ ๐ต๐ฎ๐๐ฒ ๐๐ต๐ฒ ๐๐ถ๐บ๐ถ๐น๐ฎ๐ฟ "๐ฑ๐ถ๐๐ฟ๐๐ฝ๐๐ถ๐๐ฒ ๐ฝ๐ผ๐๐ฒ๐ป๐๐ถ๐ฎ๐น" ๐๐ต๐ฎ๐ ๐๐ต๐ฒ ๐ถ๐ป๐๐ฒ๐ฟ๐ป๐ฒ๐ ๐ต๐ฎ๐ฑ ๐ถ๐ป ๐๐ต๐ฒ 1990๐. ๐๐๐๐ ๐น๐ถ๐ธ๐ฒ ๐๐ต๐ฒ ๐ถ๐ป๐๐ฒ๐ฟ๐ป๐ฒ๐ "๐ฟ๐ฒ๐๐ผ๐น๐๐๐ถ๐ผ๐ป๐ถ๐๐ฒ๐ฑ" ๐๐ต๐ฒ ๐ฒ๐
๐ฐ๐ต๐ฎ๐ป๐ด๐ฒ ๐ผ๐ณ "๐๐ก๐๐ข๐ฅ๐ ๐๐ง๐๐ข๐ก", ๐๐น๐ผ๐ฐ๐ธ๐ฐ๐ต๐ฎ๐ถ๐ป ๐ถ๐ ๐ฏ๐ฒ๐ถ๐ป๐ด ๐๐ฎ๐ถ๐ฑ ๐ณ๐ผ ๐ฟ๐ฒ๐๐ผ๐น๐๐๐ถ๐ผ๐ป๐ถ๐๐ฒ๐ฑ ๐๐ต๐ฒ ๐ฒ๐
๐ฐ๐ต๐ฎ๐ป๐ด๐ฒ ๐ผ๐ณ "๐ฉ๐๐๐จ๐".
Clearly, Chartered Accountants, CFOs and business leaders are intrigued by the promise of the Blockchain technology.
Blockchain is a protocol for exchanging value over the internet without an intermediary, such as a central bank. It is the technology allows for the secure management of a public ledger or database (also referred to as a โdistributed ledgerโ), where transactions are verified and securely stored on a network without a physical governing central authority. Blockchain technology is the backbone that supports crypto currencies such as Bitcoins.
In a marked difference from the prevailing systems of exchange of value, where two or more parties need to agree on the value and other commercial considerations for a transaction to happen, Blockchain allows for transactions within a closed group underpinned by a crypto currency. Blockchain offers the storage of records of transaction data through distributed networks. It retains the full history of transactions, which makes them verifiable and independently auditable. It also enables peer-to-peer transfer of value, potentially eliminating the need for intermediaries. In addition, event triggered programmable contracts, also known as smart contracts, can be stored and executed on Blockchain.
๐ช๐ต๐ฎ๐ ๐ถ๐ ๐๐ผ ๐ฝ๐ผ๐๐ฒ๐ฟ๐ณ๐๐น ๐ฎ๐ฏ๐ผ๐๐ ๐๐ต๐ถ๐ ๐ป๐ฒ๐ ๐๐ฒ๐ฐ๐ต๐ป๐ผ๐น๐ผ๐ด๐?
There are several intrinsic features of a Blockchain that lend it its power and allows it to record and transfer value over the internet in a peer-to-peer manner:
1. ๐ก๐ฒ๐ฎ๐ฟ ๐ฅ๐ฒ๐ฎ๐น ๐ง๐ถ๐บ๐ฒ: It enables near real time settlement of recorded transactions, removing friction, and reducing risk
2. ๐ก๐ผ ๐๐ป๐๐ฒ๐ฟ๐บ๐ฒ๐ฑ๐ถ๐ฎ๐ฟ๐: It is based on cryptographic proof, allowing any two parties to transact directly with each other, without the need for a trusted third party.
3. ๐๐ถ๐๐๐ฟ๐ถ๐ฏ๐๐๐ฒ๐ฑ ๐๐ฒ๐ฑ๐ด๐ฒ๐ฟ: The peer-to-peer distributed network records a public history of transactions, making Blockchain distributed and highly available.
4. ๐๐ฟ๐ฟ๐ฒ๐๐ฒ๐ฟ๐๐ถ๐ฏ๐ถ๐น๐ถ๐๐: It contains certain and verifiable record of every single transaction ever made that cannot be altered without altering the entire chain. This prevents double spending, fraud, abuse, and manipulation of transactions.
5. ๐๐ฒ๐ป๐๐ผ๐ฟ๐๐ต๐ถ๐ฝ ๐ฅ๐ฒ๐๐ถ๐๐๐ฎ๐ป๐: Crypto economics ensures that Blockchain continues pumping out new blocks and that blocks are not being reverted or altered.
The Gartner hype cycle puts Blockchain technology just below the peak of expectations, which means that experts still see another 18-24 months before this technology becomes main stream. Most industry experts and pundits concur, but would rather see it moving quickly beyond proof of concepts (POCs) into production sooner rather than later. While significant investments have already been made into the Blockchain ecosystem, a lot still needs to be seen. Several companies have done POCs globally, with financial services industry leading the way. The leading global banks have been actively working together in the Global Blockchain consortium R3, which is a consortium partnership of over 80 of leading financial institutions and regulators led by R3, a distributed ledger technology firm. There are several uses cases around global money movements (payments and remittances), trade finance, digital identity, smart contracts, and several others that have been established and leading firms are investigating into.
๐๐๐ข๐๐๐๐๐๐๐ก ๐๐ก ๐๐๐ข'๐ ๐ข๐๐๐๐๐:
The key question facing CFOs is how to evaluate the potential and the business case for Blockchain for their respective businesses and help the C-suite make the right level of investments in the technology before it is too late. The global economy is quickly moving towards platform-based shared business model driven by technologies, such as Blockchain.
Therefore, it is not just the CIO who alone should be leading the discussion at the C-suite for Blockchain, the CEO and the CFO, should also jointly participate in the conversation of investing in new platform based technologies, such as Blockchain, that have the power to disrupt entire business models.
There are sอeอvอeอrอaอlอ sอpอeอcอiอfอiอcอ uอsอeอdอ cอaอsอeอsอ where the Blockchain technology can prove to be useful for the Finance Function. Some of these are listed below:
1. ๐๐๐ฑ๐ด๐ฒ๐๐ถ๐ป๐ด & ๐๐ผ๐ฟ๐ฒ๐ฐ๐ฎ๐๐๐ถ๐ป๐ด
2. ๐๐ป๐๐ฒ๐ฟ - ๐๐ผ๐บ๐ฝ๐ฎ๐ป๐ ๐ฅ๐ฒ๐ฐ๐ผ๐ป๐ฐ๐ถ๐น๐ถ๐ฎ๐๐ถ๐ผ๐ป
3. ๐๐ถ๐ป๐ฎ๐ป๐ฐ๐ถ๐ฎ๐น ๐๐๐ฑ๐ถ๐
4. ๐ฉ๐ฒ๐ป๐ฑ๐ผ๐ฟ ๐ ๐ฎ๐ป๐ฎ๐ด๐ฒ๐บ๐ฒ๐ป๐
5. ๐ฆ๐ต๐ฎ๐ฟ๐ฒ๐ต๐ผ๐น๐ฑ๐ฒ๐ฟ๐ ๐ฉ๐ผ๐๐ถ๐ป๐ด
๐๐๐ฑ๐ด๐ฒ๐๐ถ๐ป๐ด ๐ฎ๐ป๐ฑ ๐๐
๐ฝ๐ฒ๐ป๐๐ฒ ๐ ๐ฎ๐ป๐ฎ๐๐ฒ๐บ๐ฒ๐ป๐ :
Conducting the budgeting and expenses on a Blockchain involves placing the entire budget data on the Blockchain and allowing the transfer of value (i.e. money) on the Blockchain to the various parties connected with the Blockchain. It will create an audit trail for each and every dollar/rupee spend, providing greater transparency and internal accountability.
๐๐ผ๐ป๐๐ผ๐น๐ถ๐ฑ๐ฎ๐๐ถ๐ผ๐ป๐ ๐ฎ๐ป๐ฑ ๐๐ป๐๐ฒ๐ฟ-๐๐ผ๐บ๐ฝ๐ฎ๐ป๐ ๐๐ถ๐บ๐ถ๐ป๐ฎ๐๐ถ๐ผ๐ป:
With the record keeping and transaction management features of Blockchain, it can easily hold the financial transactions for the group companies and aid consolidation of the financials for the group and eliminating inter-company entries. The Blockchain does not work on the double entry book keeping system, instead, it maintains a single records ledger for all transactions. The immutable nature and the historical record maintenance will facilitate the accurate consolidation of financials, enforce documentation of intercompany transactions, and promote intercompany synergies.
๐๐ถ๐ป๐ฎ๐ป๐ฐ๐ถ๐ฎ๐น ๐๐๐ฑ๐ถ๐:
With a company using the Blockchain to post every transaction on the Blockchain in real-time, the nature of financial audit will change completely. Instead of having quarterly or annual audits, the company could look to audit its financials on a daily basis. Financial audits on a Blockchain may eliminate the need for third party validators, reduce audit expense and costs for books maintenance, and provide better governance and transparency.
Requisition and vendor management: Blockchainโs ability to hold assets, transfer titles and value, and execute smart contracts will make it possible to create requisitions and manage vendors. Vendor data and identity can be easily held and verified using the digital identify feature and smart contracts can execute automated remittances and payments, reduce vendor cash conversion cycle, eliminate need for reconciliation, and promote efficient Vendor management.
๐๐ฐ๐ฐ๐ผ๐๐ป๐๐ ๐ฃ๐๐ฎ๐ฏ๐น๐ฒ ๐ฃ๐ฟ๐ผ๐ฐ๐ฒ๐๐:
Upon addition of a vendorโs digital identity to the Blockchain and the negotiated terms on a Blockchain smart contract, using shared sub-ledgers, vendors can see the requisition requests in real-time. Smart contracts can track individual assets to document their provenance, track their ownership, combat frauds, and initiate automated payments. As a result processing time will be reduced and security can be enhanced. The system will also eliminate the need for reconciliation of PO and invoices, and drive better vendor relations.
๐ฆ๐ต๐ฎ๐ฟ๐ฒ๐ต๐ผ๐น๐ฑ๐ฒ๐ฟ ๐ฉ๐ผ๐๐ถ๐ป๐ด:
Shareholder voting system can deploy the Blockchain to record the ownership of securities; and issue voting right assets and voting token assets for each shareholder. In order to exercise the vote, a user may spend voting tokens to cast votes on each meeting agenda item if they also own the voting right asset. This system has been tested by NASDAQ in a trial conducted in Estonia. Clear benefits of such a system include increased transparency due to reduced manual intervention, greater trust in the corporate decision making, and better investor relations and shareholder participation.
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บ๏ธ๐
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ฝ๏ธ ๐
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ฝ๏ธ:
๐จ๐๐ฒ๐ฑ ๐๐ฎ๐๐ฒ 1: A global e-commerce company is offering a different approach to online retail, by connecting buyers and sellers directly. The open-source project is creating a decentralized network for peer-to-peer commerce. Instead of visiting a website, users download and install a program that directly connects them to other people looking to buy and sell goods and services, removing the middlemen altogether.
๐จ๐๐ฒ๐ฑ ๐๐ฎ๐๐ฒ 2: A bank in Japan has completed a three-month trial on the application of mijin (a platform for creating Blockchains) to its accounting systems in a real-world environment. In the demonstration, 2.5 million virtual bank accounts and an environment with capacity to process 90,000 transactions every hour were created, with significantly reduced risk of failure and fraud.
๐จ๐๐ฒ๐ฑ ๐๐ฎ๐๐ฒ 3: A leading consumer equipment manufacturing company in India has started using Blockchain to make payments to their suppliers. Earlier, the payment process was cumbersome and involved several steps that included confirmation of delivery by the company, raising of a physical bill of exchange by the supplier and submission of invoice and transport documents to one of Indiaโs leading bank, for payment. After the implementation of Blockchain, the details of invoices processed in the companyโs ERP system get transferred to the bank on Blockchain, and then are discounted and funds are disbursed to the vendors of the company. On the due date, the solution facilitates an automated debit from the companyโs account maintained with the bank. The entire process cycle for bill discounting has come down from four-five days to almost real time; entire audit trail is maintained and transactions have become completely paperless.
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ฐ๏ธ๐๏ธ ๐
ต๏ธ๐
พ๏ธ๐๏ธ๐๏ธ๐
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ณ๏ธ - ๐
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๐๐ฒ๐'๐ ๐๐๐ฎ๐ฟ๐ ๐๐ถ๐๐ต ๐ฎ ๐ก๐๐ช๐ฆ ๐ณ๐ฟ๐ผ๐บ ๐๐ฒ๐ฏ2022:
https://analyticsindiamag.com/the-institute-of-chartered-accountants-of-india-plans-to-use-blockchain-technology-for-auditing/
Recently Reserve Bank of India (RBI) has published a white paper on the potential use of Blockchain in India, based on a proof of concept testing the end to end technology play in the interbank remittance process. The white paper concluded that the overall proof of concept provided a good demonstration of the use-cases and helped broaden the understanding of the technology and its potential to other real-life applications. The Whitepaper concluded that the proof of concept provided an overall good demonstration of the use cases and helped broaden the understanding of the technology and potential end uses. It is expected that RBI will stay in step with the global adoption of Blockchain for accepted mainstream usage by monetary authorities around the world and this technology will gain credence and usage soon. For the finance leaders, this is a profound transformation in the horizon upending the traditional double entry accounting protocols and driving significant efficiencies and economies. There are many unanswered questions still โ such as revenue recognition principles for a Blockchain transaction. It is only expected that the ecosystem supporting Blockchain will gradually fall in place as the regulatory framework evolves.
BLOCKCHAIN is a revolutionary technology in how financial records are created, kept, and updated. Rather than having one single owner, blockchain records are distributed among all their users. The blockchain uses a complex system of ๐ฐ๐ผ๐ป๐๐ฒ๐ป๐๐๐ and ๐๐ฒ๐ฟ๐ถ๐ณ๐ถ๐ฐ๐ฎ๐๐ถ๐ผ๐ป to ensure that, even with no central owner and with time lags between all the users, a single agreed-upon version of the truth is visible to all users as part of a permanent record. This creates a kind of โ๐๐ป๐ถ๐๐ฒ๐ฟ๐๐ฎ๐น ๐ฒ๐ป๐๐ฟ๐ ๐ฏ๐ผ๐ผ๐ธ-๐ธ๐ฒ๐ฒ๐ฝ๐ถ๐ป๐ด'; where a single entry is shared identically and permanently with every participant.
The move to a financial system with a significant blockchain element offers many opportunities to chartered accountants.
CAโs are seen as experts in record keeping, auditing and business consulting. They have the opportunity to guide and influence how blockchain is embedded and used in the future. They could use their expertise to develop blockchain led solutions and services.
The CA profession will have to draft regulations and standards to cover blockchain technology by bringing in their expertise to that work. Accountants can also work as advisers to companies considering joining blockchains themselves, providing advice on weighing the costs and advantages of the new system. CAโs expertise in business and financial areas will position them as key advisers to companies approaching these new technologies looking for opportunity.
To properly audit a company with significant blockchain - based transactions, the focus of the auditor will shift from confirming the accuracy or existence of blockchain transactions with external sources. Auditors will have to pay attention to how those transactions are recorded and recognised in the financial statements, and how judgemental elements such as valuations are decided. In the long run, as more and more records move onto blockchains, auditors would be able to check transactions in real time and with certainty.
CAโs will need to know how to advise on blockchain adoption and consider the impact of blockchain on their businesses and clients. They also need to be able to act as the bridge between IT professionals and clients. CAโs will need to expand their skills to include an understanding of the principle features and functions of blockchain.
Blockchain technology is already disrupting a number of industries, and it will only continue to grow. It will only change the way in which CAโs do their work. So, its time CAโs embrace this new technology. Learn the basics of it, start talking to clients and potential employers. You donโt need to be an expert in the technology, leave that for developers. You need to understand how to use it to your employerโs or your clientsโ advantage โ this keeps you relevant and in demand.
๐๐ผ๐ฟ ๐บ๐ผ๐ฟ๐ฒ ๐ถ๐ป๐ณ๐ผ๐ฟ๐บ๐ฎ๐๐ถ๐ผ๐ป๐ ๐ผ๐ป ๐๐น๐ผ๐ฐ๐ธ๐ฐ๐ต๐ฎ๐ถ๐ป ๐ฃ๐ฟ๐ผ๐ด๐ฟ๐ฎ๐บ๐ ๐ณ๐ผ๐ฟ ๐๐ ๐ฐ๐ฎ๐ป ๐๐ฟ๐ถ๐๐ฒ ๐ฎ๐ป ๐ฒ๐บ๐ฎ๐ถ๐น ๐๐ผ ๐ฑ๐ถ๐ฟ๐ฒ๐ฐ๐๐ผ๐ฟ@๐๐ฝ๐ฐ๐ฟ๐ฎ๐๐ผ๐ฟ๐น๐ฑ.๐ฐ๐ผ๐บ ๐ผ๐ฟ ๐ฑ๐ฟ๐ผ๐ฝ ๐ฎ ๐๐ต๐ฎ๐๐๐ฎ๐ฝ๐ฝ ๐ฎ๐ 9818083653
The Institute of Chartered Accountants of India plans to use blockchain technology for auditing
Starting from April 1, ICAI is planning to implement the system in a phased manner.
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