Smart contracts enable automated execution of agreements, rights, and obligations in digital form between two of more parties. Smart contracts introduce additional pitfalls and prerequisites to the auditing process for the auditors.
Smart contracts are tamper-proof computer codes on the blockchain that enable automated execution of agreements, rights, and obligations in digital form between two of more parties. Smart contracts provide standardization, speed, security, and certainty to transaction settlement. Accordingly, smart contracts are poised for rapid adoption as organizations seek to reduce transaction costs using blockchain technology.
One prevailing argument is that the combination of smart contract with blockchain technology reduce or eliminate the demand for audits as the underlying technology is both self-enforcing and verifiable to ensure data accuracy and integrity. However, the reality could not be further from the truth. In the blockchain era, auditors need additional skills beyond preparing and examining records, and attesting that internal control processes are working properly. In other words, auditors must be able to read and understand smart contract codes, and to relate the codes to the organization's internal control processes.
This presentation provides the attendees with key understanding of the fundamental concepts behind smart contracts, the legality, the risks relating to their use, and how that may impact audit activities. The presentation provides the launchpad from which auditors can better prepare to carry out audits of smart contracts as more organizations seek to adopt the use of blockchain technology to support their solutions and service offerings to their customers.