The Big Four Are Gearing Up to Become Crypto and Blockchain Auditors

Blockchain technology, along with the adoption of cryptocurrencies, is gaining momentum. The enterprise blockchain market is expected to reach $21 billion over the next five years. Just eleven years on, and both sectors have matured greatly, resulting in well-established organizations taking the technology more seriously as they tackle challenges that come with implementing blockchain and the use of digital assets.

Unsurprisingly, professional services giants are among those taking a larger role in tackling new market challenges. The Big Four firms and Fortune 500 companies are working with a number of blockchain and crypto companies on ways to combat regulatory uncertainty, interoperability challenges, consensus models and development of the technology. Henri Arslanian, PwC's global crypto leader, told Cointelegraph that the Big Four firms specifically have a very important role to play in the advancement of the cryptocurrency ecosystem, saying:

œAlthough Bitcoin was designed with a trustless ideology, the reality is that the industry still requires trusted entities to catalyze the development of the ecosystem.

Arslanian noted that when he first joined PwC three years ago, not many people took crypto seriously. However, he saw fast growth, which drove the company's Hong Kong firm to start accepting Bitcoin payments from clients two years ago. Since then, PwC has formed œcrypto teams in 20 countries, consisting of 200 people in total that work on crypto-related projects. œJust within the cryptocurrency sector, we've conducted over 350 engagements in the last 18 months, Arslanian said. PwC's crypto teams are not only focused on tax and accounting challenges, but audit and assurance services are also in demand. Arslanian explained:

œOver the last couple of months, we've expanded our work. We recently closed the first ever crypto fundraising deal at PwC, in which we led a $14 million series A round for a Swiss-based crypto firm with Asian family offices. We are also the auditor for BC Group, a publicly listed crypto company in Hong Kong.

Last year, Big Four firm KPMG as well as Forbes Insights conducted a survey to determine how important auditing and blockchain expertise is for finance executives. The findings show that 79% of these professionals expect their auditor to provide an understanding of blockchain's impact on their business or the financial reporting environment. 

KPMG United States blockchain audit leader, Erich Braun, further told Cointelegraph that an organization's blockchain system should be developed with the intent to meet both operational and accounting needs to comply with accounting standards and other regulatory requirements:

œSEC issuers will want to design blockchain technologies to support the entity's internal control over financial reporting. Being able to demonstrate how these technologies achieve their objectives in a well-controlled environment is critical to a successful blockchain strategy. If the technology is not auditable, the immense benefits it brings, such as increasing efficiencies and cutting costs, may not be realized. 

Helping build out blockchain systems

While Big Four firms are able to shed light on auditing for crypto companies, each of them are also working on building blockchain systems. For example, KPMG offers a number of blockchain-based software solutions. Arun Ghosh, KPMG's U.S. blockchain lead, told Cointelegraph that the firm saw a marked increase in revenue coming from blockchain initiatives last year.

Ghosh explained that recent KPMG projects have been primarily related to defining blockchain strategies, participant onboarding, and governance and operating models. Last year, KPMG helped Microsoft, Tomia and R3 create a blockchain solution for the telecom industry in preparation for 5G networks.

Ghosh further noted that the firm has seen increasing interest in the use of blockchain in combination with other technologies such as IoT, AI and machine learning. In February, KPMG announced a new U.S. patent for a blockchain-based method designed to increase trust in AI data management practices. Ghosh mentioned that this is an important development for KPMG, as it demonstrates how critical the convergence of AI and blockchain is to enable trusted artificial intelligence. He predicts that the coronavirus pandemic will fuel these models, saying:

œIn the coming years, we expect growth in enterprise blockchain and network-based models that support ˜COVID safe' supplies, identities and products. This is already being seen as there is increasing intersectionality with other technologies like IoT, AI and Machine Learning.

Big Four firm EY is also driving innovation in the blockchain space. EY's global blockchain leader, Paul Brody, previously told Cointelegraph that the firm has been working with Microsoft and ConsenSys to develop an open-source blockchain project called Baseline Protocol, which runs on the public Ethereum mainnet. 

According to Brody, Baseline Protocol attempts to solve the challenges associated with enterprises using public blockchain networks. On May 21, Baseline Protocol published a demo highlighting the ability for multiple companies to digitally manage purchase orders and volume discount agreements across disparate systems on Ethereum. This aims to show how enterprises can securely collaborate over the Ethereum network without exposing valuable data.

Fortune Global 500 company, Accenture, is also working on a number of blockchain solutions with senior managing director and global blockchain lead, David Treat, telling Cointelegraph that the firm is focused on using blockchain systems to drive digital identity, supply chain management and financial infrastructure.

In 2018, Accenture collaborated with Digital Ventures, a fintech subsidiary of Thailand's Siam Commercial Bank, to launch a distributed ledger technology solution to simplify the way companies buy and sell goods and obtain financing. Built on R3's open-source Corda platform, the solution reduces the need for physical billing in addition to invoice financing time while preventing fraudulent activity. According to Treat, this use case demonstrates how DLT can be applied for track-and-trace supply chain work, which is relevant for personal protective equipment being used during the current pandemic, adding:

œThrough the use of DLT, we have created a new revenue stream and service for small-to- medium sized enterprises, which is important in order to get global economies moving again.

More recently, Accenture collaborated with Fujitsu on an open-source software development kit called Hyperledger Cactus, which is designed to solve blockchain interoperability challenges. Treat further noted that another project with Hyperledger is in the incubation stage, mentioning the company has 160 blockchain patents. He elaborated:

œWe are not a product company, but rather we engage with clients to choose a platform that best suits their specific needs. We spend a lot of time building preferred strategic alliances with ecosystem partners. Across the board, these partnerships with product and platform providers allow us to bring the right answers to our clients.

Big Four firm Deloitte and the World Economic Forum also recently released a report on blockchain interoperability. The report brings up a key finding, noting that although blockchains are built for specific industry ecosystems, the technology may work better if all of these were linked together under one framework.

Source:https://cointelegraph.com/news/the-big-four-are-gearing-up-to-become-crypto-and-blockchain-auditors

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